President Bush Signs the Housing Relief Bill
Yesterday, President Bush signed the nearly 700 page housing relief bill into the law. The bill is aimed at slowing the economic crisis and helping to end the housing market crisis. Part of the plan is to increase the ability of Fannie Mae and Freddie Mac, along with the Federal Housing Administration, to take on larger (and riskier loans). vmvz.com reports on the measure to increase the loans the government is responsible for:
The plan also is designed to relieve a broader credit crunch that has taken hold because of rising defaults and falling home values. To free up safer and more affordable mortgage credit, the bill permanently would increase to $625,000 the size of home loans that Fannie Mae and Freddie Mac can buy and the FHA can insure. They also could buy and back mortgages 15 percent higher than the median home price in certain areas.
This seems a little fool-hardy, since such a measure puts taxpayers on the hook for these larger mortgages. Not only is the potential $300 billion for the FHA government guaranteed, but the bailout measures aimed at Fannie Mae and Freddie Mac ensure that the implicit government backing that the companies have enjoyed is now explicit.
What happens when the government has to borrow more money in order to cover these loans?
Happily, the housing relief bill also provides a new, higher cap to the allowable amount of national debt. And there is also a revenue-boosting measure: requiring payment processors to report transactions. Neither of these additions to the bill received much debate. Other provisions of the housing relief bill include:
- Stronger regulation for Fannie and Freddie. (The mortgage industry as a whole could use more regulation.)
- Grants to help state and city governments buy foreclosed homes.
- Money reserved for counseling for struggling homeowners.
- Tax benefits for homeowners.
Tags: housing relief bill, President Bush, home mortgage loan, mortgage loan blog,
FHA, Fannie Mae, Freddie Mac
