What is the government going to do to stem our current foreclosure and credit crisis?

There has been much talk by the Bush Administration and the Fed on ideas of how to alleviate the problems most people of this nation are facing due to a severly deflated housing market and illiquidity in the mortgage market because of it. Below I've pasted a summary of the American housing rescue and foreclosure prevention act  below and I would like the members of this community to discuss their experiences in respect to this crisis and concessions lenders have made to them or their clients. In my experiences I am realizing that most of this government assistance is just hot air to propogate better sentiments towards the government and the economy. Fact of the matter is though with the dollar being as weak as it is and property values on the floor, there is no way to mitigate these problems unless principal reductions are granted, otherwise more and more borrowers are going to stop making payments on their PITI alltogether. Heck, I did...why pay for something that is worthless?

Let me know what you guys think about the situation and maybe we can provide some insight for suits on Capitol Hill.

House Passes American Housing Rescue and Foreclosure Prevention Act (H.R. 3221)

Washington, DC - The U.S. House of Representatives today passed the most comprehensive response yet to the American mortgage crisis.  The American Housing Rescue and Foreclosure Prevention Act (H.R. 3221) responds directly to the current crisis facing middle class Americans while providing the tools to prevent a repeat of these problems.  The legislation combines a number of bipartisan bills including measures to modernize the FHA and reform the GSEs, which will provide crucial liquidity to our mortgage markets now, and also strengthen regulation and oversight for the future.  In addition, the housing package will help families facing foreclosure keep their homes, help other families avoid foreclosures in the future, and help the recovery of communities harmed by empty homes caught in the foreclosure process.   

For more detailed information about H.R. 5830, the FHA Housing and Homeowner Retention Act, please visit: http://financialservices.house.gov/FHA.html

Click here to view text of H.R. 3221.

Summary of H.R. 3221, the American Housing Rescue and Foreclosure Prevention Act:

Amendment 1:FHA Housing Stabilization and Homeownership Retention Act (H.R. 5830)

• Provides mortgage refinancing assistance to keep families from losing their homes, protect neighboring home values, and help stabilize the housing market.
• Expands the FHA program so many borrowers in danger of losing their home can refinance into lower-cost government -insured mortgages they can afford to repay.  This legislation will help troubled borrowers avoid foreclosure while minimizing taxpayer exposure.
• Only primary residences are eligible: NO speculators, investment properties, second or third homes will be refinanced.
• Protects taxpayers by requiring lenders and homeowners to take responsibility.  This is not a bailout; in order to participate, lenders and mortgage investors must take significant losses by reducing the loan principal.  In exchange for an FHA guarantee on the mortgage, borrowers must share any profit from the resale of a refinanced home with the government.
• Contains important protections for taxpayers’ dollars, including higher refinancing fees that establish a new FHA reserve to cover possible losses from defaults on these government-backed mortgages.
• Provides $230 million for financial counseling to help families stay in their homes.

FHA Modernization (H.R. 1852)

• Expands affordable mortgage loan opportunities for families (many of whom would otherwise turn to subprime lenders) and for seniors through expanded access to reverse mortgages through Federal Housing Administration reform
• This measure passed the House in September.  (Expanding American Homeownership Act of 2007, H.R.1852)

GSE Reform (H.R. 1427)

• Strengthens regulation of Fannie Mae and Freddie Mac, and the Federal Home Loan Bank system.
• Raises the GSE loan limits for single family homes in high cost areas, so that these entities can purchase more loans in higher cost areas (thereby lowering interest rates for new homes and refinancings in those areas).
• Expands liquidity in the mortgage markets by buying loans already made, freeing up money for new mortgages and refinances.
• Creates a new Fund to boost the nation’s stock of affordable rental housing. 

Encouraging Mortgage Modifications/Castle Bill (H.R. 5579)

• Mortgage servicers are concerned about the threat of investor lawsuits if they help families in danger of losing their homes with loan modifications that reduce monthly mortgage payments through lower interest rates, reduced principal amounts or other changes in loan terms.
• To speed loan modifications and keep more families in their homes, this package includes HR 5579 to provide mortgage servicers with clarity and certainty for their actions, and protection from such lawsuits for specified loan modifications.

Preserving the American Dream for Our Nation’s Veterans 

• Increases VA Home Loan limit, as was done in the stimulus package, for high-cost housing areas so that veterans have more homeownership opportunities.

Amendment 2-- Tax Provisions to Expand Refinancing Opportunities and Spur Home Buying (H.R. 5720): This amendment provides $11 billion in tax benefits, including tax credits to first-time homebuyers, a real property tax deduction for non-itemizers, an additional $10 billion in mortgage revenue bonds for states, and improves access to low-income housing.

• Gives first-time homebuyers a refundable tax credit that works like an interest-free loan of up to $7,500 (to be paid back over 15 years) to spur home buying and stabilize the market.  The credit will begin to phase out for taxpayers with adjusted gross income in excess of $70,000 ($140,000 in the case of a joint return).
• Provides taxpayers that claim the standard deduction with up to an additional $350 ($700for a joint return) standard deduction for property taxes in 2008.
• Temporary increase in mortgage revenue bond authority to allow for the issuance of an additional $10 billion of tax-exempt bonds to refinance subprime loans, provide loans to first-time homebuyers and to finance the construction of low-income rental housing.
• Temporary increase in low-income housing tax credit and simplification of the credit to help put builders to work to create new options for families seeking affordable housing alternatives.
• Helps returning soldiers avoid foreclosure by lengthening the time a lender must wait before starting foreclosure, from three months to one year after a soldier returns from service. 
• Would not add to the national debt.  The cost of this bill is offset with a tax compliance provision included in the President’s Budget and by delaying the effective date of a tax benefit for multinational companies that has not yet taken effect.
  

Amendment 3-- Miller/LaTourette

• This amendment protects the right of states and cities to regulate the foreclosure process and the treatment of foreclosed property -- by clarifying that this act, the National Bank Act, and the Home Owner’s Loan Act do not preempt State foreclosure laws for national banks or federally chartered thrifts. 
• Exempting national banks and thrifts from foreclosure law would deprive the states and cities of the right to require that foreclosures must follow certain procedures, including notice to the people foreclosed, and that foreclosed property be safely maintained.
• Many in the industry and in the Bush administration argue that national banks should be exempted from these rules. There is no reason that national banks and federal thrifts should be treated differently from all other mortgage holders when it comes to how to foreclose and how to maintain foreclosed property.