Housing bill on track to pass Senate
Foreclosure aid: Measure would help about 400,000 homeowners.
The Senate cleared the last hurdle Friday to passing a housing rescue aimed at sparing hundreds of thousands of homeowners from foreclosure and bolstering troubled mortgage giants Fannie Mae and Freddie Mac.
The 80-13 test vote showed broad support for the election-year package and put it on track to pass the Senate by today. The White House says President Bush will sign it, having earlier dropped a threat to veto it over $3.9 billion in neighborhood grants.
The bill — regarded as the most significant housing legislation in a generation — is designed to help an estimated 400,000 homeowners escape foreclosure by letting them refinance into more affordable loans backed by the Federal Housing Administration.
It was set to clear Congress as a private company reported that the number of households facing the foreclosure process more than doubled in the second quarter of 2008 compared with a year ago. RealtyTrac Inc. of Irvine, Calif., said that 739,714 homes received at least one foreclosure-related notice during the quarter, or one in every 171 U.S. households.
”The American people can begin to see they’re going to get some relief and some help from their Congress,” said Sen. Christopher J. Dodd, D-Conn., the Banking Committee chairman.
The plan gives the Treasury Department power to spend unlimited amounts to prop up Fannie and Freddie, should they need it, to calm investor fears about their financial stability at a time of rising foreclosures and falling home values. Treasury Secretary Henry M. Paulson calls the authority a ”backstop” which he has no intention of using.
Paulson’s request for the emergency power helped forge a bipartisan deal on the legislation, which also creates a new regulator with tighter controls on the government-sponsored mortgage firms — something Republicans have long sought.
Democrats also won key concessions as part of the compromise, including a permanent affordable housing program to be financed by Fannie and Freddie profits and the $3.9 billion in grants for buying and fixing up foreclosed properties in neighborhoods hit hardest by the housing crisis.
Many conservative Republicans are vehemently opposed to the foreclosure rescue, which they call a bailout of irresponsible homeowners and unscrupulous lenders. They are equally furious about the help for Fannie Mae and Freddie Mac, companies they say enjoy lavish profits in good times and wield their outsized political clout to resist regulation while depending on the government to bail them out should they falter.
Sen. Jim DeMint, R-S.C., was single-handedly delaying a final vote on the package until today because Democrats refused to allow a vote on his proposal barring the two firms from lobbying and making political contributions.
”These organizations that are now guaranteed by the American taxpayer should no longer be able to spend millions of dollars buying influence in Congress. That’s a conflict of interest,” DeMint said.
Dodd called Republican efforts to delay the measure’s passage ”tragic” given how many people are losing their homes each day.
More than three-quarters of Republicans voted against the measure when it passed the House on Wednesday.
By Julie Hirschfeld Davis | Of The Associated Press
July 26, 2008
Lehigh Valley home prices continued to tumble downward in August and the number of homes sold sunk compared to the ...
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Comment by admin on 28 July 2008:
The mortgage bailout decoded
Ok, so what does all this really mean? When most people hear about a government bailout they think a bunch of irresponsible people who didn’t pay their mortgage are going to get a pile of free cash to pay off their mortgages. UNTRUE.
The fact is most people don’t understand the mortgage process and when they go to buy a house they do not fully understand the terms and conditions of the loan. In fact loan officers, mortgage broker’s etc work on commission. They are not necessarily always working in the best interests of the borrower.
The vast majority of short sales and foreclosures happing now, and projected to happen over the next two years are the result of creative financing and irresponsible lending by banks and mortgage companies all over the country. And now, the chickens are coming home to roost.
As with most financial services, including credit cards, car loans, and mortgages, the so-called sub-prime borrowers, or people with less than perfect credit as they say, are easy targets for banks. They love them. Because these people are just so happy to get approved they don’t pay attention, and don’t understand the terms of they are given. Outrageous interest rates, excessive points and fees, adjustable rates, deceptive terms and conditions - that is what banks hand out like candy to any takers. And unfortunately in most cases, sub-prime borrowers are the takers. But not always.
Even people with average and good credit are victims as well. Banks gave out mortgages left and right with very unfavorable and in some cases deceptive terms. They get you in the door now and the all of the sudden in two years, your mortgage payment skyrockets, sometimes even doubling, or worse. Then what?
Then what happens is they cannot make their payments obviously. The banks approve you at a particular rate and a particular payment, based on your credit score and your ability to pay, that payment and that rate. And they really don’t care about what happens in two years when the rates and payments go up. Why? Because in most cases the notes (mortgages) are sold off. These notes, as they are called are commodities, bought and sold every day by bankers and brokers. So ultimately, it becomes someone else’s problem to deal with.
What the housing bill is doing is not giving anyone free money. It is giving people a chance to get out of these high interest, adjustable rate loans by allowing them to refinance into a conventional loan with more reasonable terms. Plain and simple that is what is going to happen if it passes.
Republicans, for the most part are against this, but luckily we have a democratically controlled congress. However the Republicans do make a valid point. Though not fully understanding the so called bailout (which is why they are against it) The recognizes that Fanny and Freddie Mac (the two Federally created entities that regulate and insure most mortgages) should not be allowed to make money hand over fist in the good times, then come crying in the bad times, using their profits to pay high-powered lobbyists to help stop any new regulations to protect and stabilize borrowers and the mortgage market.
We don’t have time to fully explain the Freddie/Fannie Mac situation, but it is a clear conflict of interest and contradiction for them to be paying lobbyists. They were created by the federal government to protect and serve the mortgage industry, not try to regulate themselves. We need checks and balances.
But ultimately it look as though the housing bill will pass, and millions of people who were taken advantage of will now have a chance to get a conventional mortgage, and pay off their debts just like everyone else.
Comment by admin on 31 July 2008:
President Bush on Wednesday signed into law a sweeping housing bill that aims to boost the struggling housing market and bolster mortgage finance giants Fannie Mae and Freddie Mac.
The legislation has two principal objectives: to offer affordable government-backed mortgages to homeowners at risk of foreclosure, and to bolster Fannie and Freddie with a temporary rescue plan and a new, more stringent regulator.
The FHA will be allowed to insure up to $300 billion in new 30-year fixed-rate mortgages for at-risk borrowers in owner-occupied homes if their lenders agree to write down loan balances to 90% of the homes’ current appraised value.
The cost of the new FHA program - which would begin on Oct. 1 and be in place for just a few years - will be funded by fees from Fannie and Freddie, along with fees paid by both lenders and borrowers.
A new home-buyer credit. The new law includes a tax refund for first-time home buyers worth up to 10% of a home’s purchase price but no more than $7,500.
The refund, however, serves more as an interest-free loan, since it would have to be paid back over 15 years in equal installments.
A ban on down-payment assistance from sellers. The new law eliminates a program that has allowed sellers to provide down payment assistance for FHA loans.