After months of doing nothing, the Senate finally got its act together last week and passed two important housing bills in a single day!

Both pieces of legislation have potentially important roles to play in the mortgage industry's relief efforts for hundreds of thousands of homeowners now struggling with subprime adjustable-rate loans.

First the Senate passed the FHA Modernization Act -- a bill you've heard a lot about since September here at Realty Times, when the House passed its version by a big margin.

The Senate's bill is a little less generous than the House's -- FHA's new maximum mortgage amounts would be capped at $417,000, whereas the House's version allows loan amounts to rise according to local median price levels.

Under the House bill, FHA's limits would be well over $500,000 for much of California -- and over $700,000 for super-expensive local markets such as San Francisco and portions of the Bay area.

The final dollar limit will need to be hammered out in negotiations between the House and Senate early next year.

The House version also allows zero downpayments, while the Senate sets a 1 and a half percent minimum. Both would be improvements over the current 3 percent minimum.

The Senate also finally got around to passing the Mortgage Forgiveness Debt Relief Act that's been sitting on the agenda for months. That's the one that prohibits the IRS from demanding income taxes from financially-stressed borrowers whose lenders forgive a portion of their principal balance as part of a "short sale" or loan modification agreement.

The same bill extends the deductibility of private and FHA mortgage insurance premiums through 2010-another plus for homeowners trying to make ends meet in a tough market.

Better late than never seems to be this year's working motto in the Senate when it comes to dealing with the housing crisis.

But let's face it: Later IS better than never!

Published: December 21, 2007

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.