Do You Know The Facts About The New Housing Relief Bill
July 27, 2008
Senate Approves Measure, but Critics Say Law Unlikely to Prevent Most Foreclosures
“This is not the end of the housing crunch,” said Jared Bernstein, a senior economist at the Economic Policy Institute. “Housing prices have already fallen 15 percent and they need to fall 10 percent more. This bill isn’t going to change that equation.”
The Senate voted 72 to 13 to approve the bill, which seeks to halt the steepest slide in house prices in a generation, rescue hundreds of thousands of families from foreclosure and restore confidence in the nation’s largest mortgage-finance firms. White House officials said President Bush is likely to sign it by midweek, despite his opposition to nearly $4 billion in aid to local communities.
It’s sad that Bush is being pushed into a corner about this. It makes this Country look weak and almost socialist in nature, but then again isn’t that Obama’s platform?
Obviously I am not the only one who feels this way. After yesterday’s vote, Sen. Jim DeMint (R-S.C.) said the authority given the Treasury “crosses the line into socialism.”
The centerpiece of the legislation is a plan to prevent as many as 400,000 foreclosures by authorizing the FHA to help people who, because of falling prices, owe the banks more than their homes are worth.
If lenders agree to forgive a portion the debt and write new loans worth no more than 90 percent of the home’s current, lower value, the FHA will insure the new loans and agree to pay off the lenders if borrowers default. [I'm sorry I did not realize this was about falling prices, I thought the problem was because people weren't paying their mortgages. Silly me!]
Homeowners also would get an immediate equity stake in their properties, which they would have to share with the government if they sell or refinance. [So in other words this is an episode of "Flip This House" with the United States Government as the lead investor. Uncle Sam starring as the lead investor. Wow!!]
You can read story after story about this bill being some kind of lifeline for the housing industry. Sadly, if you are one of those eternal optimists its time to take off the rose colored glasses.
Let’s just look at the facts shall we and then you can decide on your own.
Fact: About 5.5 million home loans are projected to default by 2009, but the bill passed yesterday is expected to prevent only 400,000 foreclosures
Fact: 8,500 families a day are falling into foreclosure
Fact: 1 out of every 8 homes is projected to enter foreclosure over the next five years.
Fact: The new housing bill would give the Federal Housing Administration $300 billion in new lending authority and relax standards to provide affordable, fixed-rate mortgages to an estimated 400,000 debt-ridden homeowners. Any losses would be covered by an affordable housing fund financed by Fannie Mae and Freddie Mac, the government-sponsored companies that finance mortgages.
Fact: The new housing bill would allow the Treasury Department temporary authority to lend money to Fannie and Freddie or buy their stock to avert a collapse of one or both of the mortgage giants. The authority would expire on Dec. 31, 2009.
Fact: The new housing bill would create a new regulator and tighten controls on Fannie and Freddie, including power for the regulator to approve pay packages for company executives.
Fact: The new housing bill would create an affordable housing fund drawn from their profits. Permanently raise the limit on the loans they may buy to $625,000 in the highest-cost areas. Allow them to buy loans 15 percent higher than the median home price in certain cities.
Fact: The new housing bill would provide $3.9 billion in grants to the hardest-hit communities for buying and fixing up foreclosed property. [so now you will have cities looking to buy REO properties and re-selling them. You're kidding right! This single provision would turn into an entire article on its own.]
Fact: The new housing bill would modernize the FHA and allow it to back loans for riskier borrowers. Permanently increase the size of loans the agency may insure – currently set to revert to $362,790 by the end of the year – to $625,000 in the highest-cost areas. The agency could insure loans 15 percent higher than the median home price in certain cities. [We're all being Punked! Are you kidding me? Let's solve the foreclosure crisis by allowing MORE loans to risky borrowers. Let me say that again..we're going to solve the foreclosure crisis by providing more loans, at higher limits to risky buyers...and you don't see this as being just a bit Socialist??]
Fact: The new housing bill would forbid the FHA from insuring mortgages in which the borrower’s down payment is paid by the seller, beginning on Oct. 1, 2008. [ So what good is a bill to stimulate the economy when no one's going to have the down payment anyway?? If they had the down payment then they could be paying on their current mortgage. Or are you saying...don't pay your mortgage, save the money so that you have the down payment?]
Fact: The new housing bill would place a one-year moratorium forbidding the agency from charging premiums based on the riskiness of the homeowner, until Oct. 1, 2009.
Fact: The new housing bill would provide $15 billion in housing tax breaks, including for low-income housing. [ I hate to keep bringing up the "S" word, but c'mon...$15 Billion of our money for those who can't afford to own a home. If that's not a socialist, vote pandering attitude, then what is?]
Fact: The new housing bill would give a credit of up to $7,500 for first-time home buyers who purchase residences between April 9, 2008, and July 1, 2009.
Fact: The new housing bill would allow people who don’t itemize their taxes to claim a $500-$1,000 deduction on their 2008 property taxes.
Fact: The new housing bill would give states an additional $11 billion in tax-free municipal bond authority for low-interest loans to first-time home buyers, construction of low-income rental housingand refinancing subprime mortgages.
Fact: The new housing bill would offer protection from investor lawsuits for mortgage holders that modify loans to borrowers who are in default or about to default.
Fact:The new housing bill would provide $180 million for pre-foreclosure counseling and legal services for distressed borrowers.
All of this for what? To keep a few, more than likley undeserving, homeowners out of foreclosure. Now we’re all going to know what it’s like to stand in front of a raging wildfire and attempt to contain it with a water-hose…a leaky water-hose. This socialist leaning bill is absurd and insulting to every hard working, credit worthy American.
“If we’re lucky enough to help 400,000 households,” said economist Jared Bernstein, “I’m afraid it’s a drop in the bucket.”
He’s right, but what he failed to add is just who is left holding that bucket.
About the Author:
Robin Sing-Cunningham, is a real estate agent serving Fort Lauderdale and Broward County, Florida. Robin specializes in distressed and bank owned properties in the Fort Lauderdale real estate area.
Robin began her blog recently after over seven years in the real estate business. She brings a unique perspective to her writing as she has worked on the building and development side of the business and has worked extensively with investors on the foreclosure side of the business.
Robin is an avid sport fishing enthusiast and when not selling real estate can usually be found off the coast of Fort Lauderdale looking for that next big game fish.
She's also the wife of one of the hosts of the #1 real estate related talk radio show in America Real Estate Radio USA and occasionally makes appearances on the show to talk about Fort Lauderdale real estate and to lend her perspective on the industry.
You can contact Robin at 954-709-7461 or visit the Fort Lauderdale Real Estate Blog. You can also email Robin at robins@robinashley.com
According to the aforesaid information, the foreclosure problem will not be satisfied by the pending bill in the senate. What other solution(s) are available?
My concern is the elimination of 100% loans altogether; one should obtain a loan on the merits of their credit history, not the money they put down.
While I think DPA should be eliminated, I also believe it should be replaced by FHA insuring 100% loans.
Marilyn, thanks for stopping by. The solution…men and women smarter than I should come up with a realistic solution to the problem that does not require hard working , credit worthy taxpayers to bear the burden for those who are not. Wealth redistribution is most assuredly not the answer. IMO.
Stephen from georgia, thanks for the comment, You’re talking tough…and I agree. a loan should be determined strictly on the ability to pay it back and the value of the underlying collateral. However in declining markets, wherein the ltv may expand because of shrinking home values, down payments are necessary to insure protection. But the answer, may be as you say…FHA insured 100% mortgages..but for EVERYONE..which is not what this bill seeks to do.
Hi Robin,
this is the best explanation of this bill I have read……..nicely done.