Congress Passes Housing Bill, Bush Will Sign

The Congress has passed a housing bill that will do much to alleviate the current stress and strain in the housing markets. When Mr. Bush announced he was flip-flopping on the issue and would sign the act, he made one of the better decisions of his administration. While the legislation doesn’t please everyone, it has pragmatically addressed some of the problems America has, and it may well shorten the current economic storms.

The lynchpin of the bill is the authorization of the Federal Housing Authority to guarantee up to $300 billion in loans to allow homeowners to refinance their homes. However, the old lender has to take a hit to get out of the deal, accepting 80-90% of the homes current market value. And the borrower winds up with the FHA as a partner when the house gets sold – the FHA gets at least half the profits.

In addition, Fannie Mae and Freddy Mac (the two government sponsored enterprises that hold half the nation’s mortgages) will get a real regulator to make sure they don’t screw up again. The bill also increases the national debt limit by $800 billion to pay for any necessary injection of funds.

There are some bits of the bill that are off the mark. New affordable housing funds don’t make much sense when house prices are dropping. Giving local governments $4 billion to renovate foreclosed properties is merely a handout to the banks. And Fannie Mae and Freddy Mac are still allowed to pay dividends even while taking government cash.

All in all, however, the bill provides some relief to those who are too big to fail while helping out some of the little people. It will help calm Wall Street down, and it may even get banks lending again. It just won’t happen right away – it doesn’t take effect until October 1, with the start of Uncle Sam’s new fiscal year.

© Copyright 2008 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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