Housing Bill Passes Through Senate and Heads to President Bush's Desk
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.
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