Wednesday, July 30 2008
By Tom Elder
It was an early morning for President Bush and top administration officials Treasury Secretary Henry Paulson and Housing Secretary Steve Preston.
After threats of VETO, minor revisions and a housing crisis for the record books, Bush said that troubled homeowners can wait no longer for relief.
In the early morning hours Bush approved, by signature, what is being deemed the most significant legislation for the housing markets in decades. This new legislation will allow struggling homeowners, who are unable to afford their payments to refinance into government backed loans which are much more affordable.
This legislation will offer struggling Fannie Mae and Freddie Mac temporary financial help. The relief for these agencies will come through the Treasury department having unlimited authority to lend money to Fannie and Freddie or purchase their stock should they need to. This help comes with a price though; The Federal Reserve will assume the new role overseeing the companies.
The plan will also spare an estimate 400,000 struggling homeowners from foreclosure. A large majority of these homeowners owe more than the house is worth. Under the new plan they would qualify for a new loan with FHA with much better terms. The participating lenders would have to take huge losses in the payoffs in order for the new loan to be issued. For many in extreme declining markets, this relief comes too late, as the losses will be too high for lenders to absolve.
The most significant highlight of this legislation is the permanent increase in the lending limits to $625,000 for conventional (Fannie and Freddie) and FHA mortgages. It would also allow them to buy and back mortgages 15% higher than the median home price in specific areas.
The plan also includes $15 Billion dollars in tax breaks. There will be a low housing tax credit and a credit of up to $7500 for first time homebuyers for houses purchased between April 9th, 2008 and July 1st, 2009.
One of the most noted oppositions to this legislation if from the Conservative Republicans themselves. They criticize the efforts of the government to bail out Fannie Mae and Freddie Mac who enjoyed the profits of the boom era, fighting legislation with their considerable influence and then turn around and depend on the Government when the fail.
© 2008 Tom Elder
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I don't know if I'm particularly inclined to read all 260 pages of it...... them politicians are mighty long-winded..... everyone nowadays seems to be talking about the elimination of DPA programs for FHA loans, increased loan limits and the .5% downpayment increase for FHA loans. I will take a lookout to figure out what the regulatory "carrot and stick" is for getting lenders and servicers not only to write down an existing loan to 90% of its face value, but also to give up the servicing for it when it gets refinanced into a new loan through the HOPE program. Stay tuned.....