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.

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.