The housing act, won approval in Congress on Saturday and President Bush signed it today! It aims to provide relief to homeowners, incentives to buyers, guidance to lenders and oversight to vital government-sponsored entities, such as Fannie Mae and Freddie Mac.

On paper, the act holds out help for thousands in need:

HOMEOWNERS

$300 billion in FHA loans for refinancing

The bill would help an estimated 400,000 homeowners avoid foreclosure by allowing them to refinance into lower-cost mortgages insured by the Federal Housing Administration. To qualify, borrowers must have a relatively high level of debt to income, use their homes as primary residences and agree to share any profits from any eventual resale with the government. And the lenders must agree to write down the loan principals.

HOME BUYERS

$7,500 tax break for first-timers

First-time buyers are already able to take advantage of low housing prices. Now, if they qualify, they can also receive a tax benefit of $7,500 or 10% of the home's purchase price, whichever is less. (The income caps for the full benefit are adjusted gross income of $75,000 for single people and $150,000 for couples who file taxes jointly.)

LENDERS

FHA's role could help shrink losses

Lenders have taken a pounding as the mortgage market has deteriorated. Moody's Economy.com estimates that financial institutions will lose $925 billion on assets originated through 2007 -- including $525 billion in losses on mortgage loans. So far, financial institutions have announced write-downs of nearly $350 billion.

FANNIE MAE AND FREDDIE MAC/TAXPAYERS

Treasury can spend billions for safety net

The measure for the first time explicitly gives the government's backing to Fannie Mae and Freddie Mac. The hope was to provide stability and confidence to the financial markets, which, the administration said, would help the overall economy. The Treasury has the power to rescue both companies, either through loans or by infusing them with capital.

The Congressional Budget Office estimates that the government could spend $25 billion to bail out the two companies, though the CBO has said it thinks there's a less than 50% chance that either company will need to tap the new credit lines. The legislation raises the federal debt ceiling by $800 billion, to $10.6 trillion, enough to accommodate a potentially enormous bailout funded by taxpayers.

COMMUNITIES

$4 billion to buy, rehab foreclosed homes

The Center for Responsible Lending estimates that the second-hand effect of foreclosures on communities will result in a property loss of more than $350 billion for 40 million neighbors of foreclosed homes.

The bill offers $4 billion for communities. Localities can use the money to buy homes at a discount and rehabilitate them. The homes are sold to low- and moderate-income families, with profits used for neighborhood development.

"In every major city, local governments are having to deal with vacant homes," says Eugene Lowe, assistant executive director United States Conference of Mayors. "Crime, up-keeping those homes, falling home values in the immediate area -- a whole host of problems cities are contending with. The $4 billion will be very helpful in stabilizing those neighborhoods."

The bill also provides for $180 million devoted to pre-foreclosure and legal counseling to be distributed in grants by NeighborWorks, a national non-profit.

THE ECONOMY

Job market could eventually benefit

Federal Reserve Chairman Ben Bernanke calls housing the top economic issue. New home sales are off 33% from a year ago, existing-home sales are down 15% and prices have plummeted by double-digits in major markets. As housing has crashed, financial firms have written off hundreds of billions of dollars in losses. In response, lenders have tightened up on lending and perpetuated the cycle. The new legislation might keep things from getting worse.

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