 After many months of deliberations, the Senate finally passed a housing bill in a special Saturday session of Congress to come to the aid of the widely troubled real estate market and struggling government-backed mortgage companies, which have been pressing the government for aid since September of 2007.
The real estate market has been plagued by a surge of foreclosures, mortgage defaults, and deflating home values since the market bubble burst in 2007. Many homeowners have been struggling to make mortgage payments and stay in their homes as adjustable rate mortgages (a popular financing option during the boom) reset to higher interest rates. To compound the problem, home values continue to deflate as more inventory and foreclosures hit the market. In areas like Las Vegas, Southern California, and Southwest Florida, some communities have lost up to 50% of their home values in the past six months. "This legislation won't perform miracles. But as others have said, it's a step - and I hope an important step - to putting our nation on the road to economic recovery," Senator Christopher Dodd (D-Conn.) chairman of the Senate Banking Committee and a principal author of the bill said to CNN. The previous Wednesday, the House of Representatives passed the bill that would allocate up to $300 billion in loans for struggling homeowners and bail out troubled mortgage security giants Fannie Mae and Freddie Mac. The legislation passed shortly after President Bush reversed his stance on the issue. Previously, Bush vowed to veto any housing bill that came to his desk. In February, Bush remarked to reporters: "We are committed to a good housing bill that will help folks stay in their house as opposed to a housing bill that will reward speculators and lenders. I will veto the bill that's moving through the House today if it makes it to my desk." The House passed the bill last Wednesday with an overwhelming 272-152 vote. Just hours before the House voted, President Bush withdrew his veto threat saying the housing market and the economy as a whole could use a "bolster in consumer and investor confidence." Shortly after the House vote, the Senate met on Saturday to nearly unanimously approve the bill. The Senate voted 72-13 in favor of the housing bailout bill. Despite the bipartisan push to approve the bill, the housing bailout was not without its staunch opponents. Many have argued that mortgage lenders and Fannie Mae/Freddie Mac should not be "bailed out" for their reckless and often predatory lending practices. "You make your bed, you lie in it," says Toni Gehman, a high profile real estate investor. "It's [the housing bill] irresponsible and the American tax payers should not be the ones held accountable for the greed and predation of banks and mortgage lenders," a heated Gehman continued. If President Bush passes the bill as expected, the provisions would include: Expanded FHA Program- the Federal Housing Administration would be permitted to insure up to $300 billion in new fixed -rate mortgages for at-risk borrowers, which would begin October 1st. Stronger Regulations for Government Sponsored Enterprises- the bill would essentially give greater regulatory oversight in government sponsored enterprises (GSEs) that have a major impact on the mortgage and housing markets, i.e. Freddie Mac and Fannie Mae. Permenant Changes to FHA Loan Limits- the bill would permanently increase the cap on federally guaranteed mortgages from $417,000 to $625,500. Tax Refunds- the bill includes a provision to give tax refunds (up to 10% of the home's value with a $7,500 limit) to first time homebuyers. Eliminate Down-Payment Assistance for FHA Loans- Sellers would no longer be allowed to provide assistance by providing down payments on FHA backed loans. State Grants for Foreclosure Rehab- the bill would allocate $4 billion to states to buy up and rehab foreclosed properties. Foreclosed properties bring down property values in the surrounding neighborhood and are notorious magnets for crime and criminal deviants. |
