http://www.reuters.com/article/topNews/idUSN2141192720080726?feedType=RSS&feedName=topNews Congress approves housing bill Sat Jul 26, 2008 2:34pm EDT By Kevin Drawbaugh WASHINGTON (Reuters) - The U.S. Congress approved a massive housing market rescue bill on Saturday, offering emergency financing to mortgage titans Fannie Mae and Freddie Mac, and setting up a $300-billion fund to help hundreds of thousands of troubled homeowners. Approved by the Senate in a 72-13 vote, the bill was passed by the House of Representatives on Wednesday and President George W. Bush was expected to sign it promptly. With foreclosures at record levels, home sales sluggish and property values down, America is in its deepest housing slump since the Great Depression. The crisis will be eased, but not ended by this election-year bill, said housing activists and scholars. Fears that Fannie Mae and Freddie Mac, the largest U.S. mortgage companies, might collapse rattled global markets earlier this month and lead the Bush administration to call for emergency measures to bolster investor confidence. Fannie Mae and Freddie Mac recently lost billions of dollars on bad home loans and the stock market has whipsawed their share prices on uncertainty about whether they have enough capital. "We have a housing market going into cardiac arrest. This bill is like CPR to stabilize the situation," said David Abromowitz, a senior fellow at the Center for American Progress, a think tank in Washington. The National Community Reinvestment Coalition, an alliance of 600 community investment and development groups, estimated 2.5 million U.S. households will face foreclosure this year. While Congress' legislation is welcome, the coalition said, it "will likely have little effect on the foreclosure crisis gripping the financial markets and economy." HELP FOR FANNIE, FREDDIE As private finance has retreated from the mortgage sector, the importance of Fannie Mae and Freddie Mac has grown, and they own or guarantee almost half the country's $12 trillion in outstanding home mortgage debt. Under a provision put into the bill late in its development at the administration's urging, Fannie and Freddie could draw on a temporary line of U.S. Treasury credit or the government could buy shares in them, if they ran into trouble. Texas Republican Sen. Kay Bailey Hutchison said the housing bill had positive aspects. But she added, "I am troubled by the inclusion of an unlimited U.S. Treasury credit line to Fannie Mae and Freddie Mac" and possible government stock purchases. The bill establishes a $300-billion fund under the Federal Housing Administration to help distressed homeowners get more affordable, government-backed mortgages and get out from under exotic mortgages they cannot afford. The success of the temporary fund will depend on lenders' willingness to accept losses on original loans to shift overstretched borrowers into new loans. An estimated 400,000 families could be helped by the program. But it would not take effect until October 1 and housing activists said it might not be in full operation until 2009. Connecticut Democratic Sen. Christopher Dodd, who steered the bill through the Senate, said the FHA fund should need "four months to get it up and running." He said he would meet with agency officials to urge rapid implementation. The bill sends about $4 billion in grants to communities to help them buy and repair foreclosed homes; offers tax breaks to spur home-buying; sets up the first national licensing system for mortgage brokers and loan officers; and raises the limit on the size of mortgages that federal agencies can guarantee. NEW REGULATOR The bill also creates a new regulator for the shareholder-owned companies with sharper teeth than the existing one, including power over their capital levels, with Federal Reserve consultation, and over their executive compensation and internal financial controls. Because they are chartered by Congress they are often referred to as government-sponsored enterprises, which also gives them an implied government guarantee. Senate Majority Leader Harry Reid, a Nevada Democrat, told reporters after the vote he expects the bill to be sent to the White House on Monday. White House spokesman Tony Fratto said Bush will sign the bill when he receives it. Both presidential contenders Barack Obama and John McCain praised the Senate's passage of the housing bill. Illinois Democratic Sen. Obama said in a statement that the bill was "urgently needed" and represented "an important start to protecting homeowners and restoring stability to our housing market and our economy." Sen. McCain, an Arizona Republican, "believes that relief for struggling homeowners is overdue, applauds the passage of this legislation and urges the president to sign it quickly," said McCain spokesman Taylor Griffin in a statement. (Reporting by Kevin Drawbaugh and Patrick Rucker, editing by Jackie Frank)
THIS BILL DID NOT MARK ANY KIND OF BOTTOM IN HOUSING. Another day another bill being created to help those who didn't deserve a mortgage to begin with.
It will actually help to drag out the bottom by helping to keep prices inflated over what they should be in some areas. This will keep inventories high. Same concept as avoiding a recession at all costs. Just makes things worse in the long run. The Government should not mess with the markets except in extreme cases such as the BSC fiasco. I do believe they had to do that. Way too much counter party exposure there. This housing bill really pisses me off. The tax payer will foot the bill for all those 70k per year plumbers in $750k homes! I should have bought a home way above my means dammit.
A decent article outlining who qualifies and the strings attached: http://money.cnn.com/2008/07/26/real_estate/housing_rescue_guide/index.htm?postversion=2008072611
HA!!!!!!!HA!!!!!!!! The old gubmint speak for an increase being a cut: "As part of the deal, the old lender writes off any fees and penalties on the original mortgage, including prepayment penalties, and accepts the proceeds from the new loan on a paid-in-full basis. Additionally, it pays the FHA an up-front premium equal to 3% of the mortgage principal." and "However, the refinanced loans do come with many strings. For one thing, borrowers are responsible for paying an insurance premium to the FHA guaranteeing the loan, which will be 1.5% of the principal annually. Borrowers also agree to share any profits from future home-price appreciation with the FHA. To do that, they'll pay a "3% exit fee" of the mortgage principal to the FHA when they resell or refinance. Plus, they'll agree to pay the FHA 100% of any profits they realize from higher home prices if they sell or refinance within a year. So if the original loan principal is $200,000 and the home sells for $250,000, the borrower will owe the FHA $50,000, minus costs. After a year, borrowers will share 90% of the profits with the FHA. The percentage keeps dropping in 10% increments to 50% after the fifth year, where it stays." Soon we'll get a note saying "we kept your check, here's $5.00 for McDonalds"