New Housing Bill Signs Away Hope for Millions

WASHINGTON, D.C. - On Wednesday, President Bush signed into effect legislation aimed at stabilizing the floundering housing market. According to The New York Times, the bill allows for the rescue of mortgage giants Fannie Mae and Freddie Mac, should they verge on collapse. The bill raised the national debt ceiling by $800 billion to allow for this possibility. Further, the bill promises help to qualified homeowners who who purchased a home from January 2005 through June 2007 with FHA backed refinancing. The homeowner bail outs are voluntary, and do not force lenders to cooperate. Additionally, newer homeowners may qualify for tax credits.

How far is this legislation really going to go to help troubled homeowners? According to the same article, the plan is aimed at helping as many as 400,000 troubled homeowners replace their current mortgage with government insured loans. Remember when I stated that under the new housing bill the program was VOLUNTARY? Despite the fact that corporate America on the whole is not exactly consumer-oriented, in order for the refinanced loans to be government insured, the original lender has to agree to take what can sometimes be a significant loss by reducing the principal debt of each mortgage prior to any refinance. This will work in most cases only when the loss incurred with voluntary participation in this program is less than the losses incurred by navigating the costly foreclosure process. There are also many hoops to jump through, including new appraisals, etc. Why would corporate mortgage companies want to do such a thing? Are they not in business to make a profit? It will be interesting to see how many of the lenders volunteer to participate in the programs created by the housing bill, and how often.

The budget office estimates about 35% of these refinanced mortgages will end up in trouble again, according to the article. So, how does this program really help? Personally speaking, we bought a house we could barely afford four years ago, and now that things have changed economically, we cannot afford it. "Robbing Peter to pay Paul" only works for so long, and not so well. I looked forward to the signing of this bill, until it hit me: we don't qualify. We purchased our home three months before the qualifying time period. (And if we did, I can guarantee you that our not so understanding mortgage company would not be likely to agree to participate in this program.) I live in small town East Texas. Each day, I see the same houses for sale as I drive down my street. Every few weeks, a new home is vacant and on the market. I said goodbye to a dear neighbor, as she left to move in with her parents due to the rising cost of her mortgage, and the decreasing amount of money she had to pay it after the also rising costs of gas, food, and well, everything else.

The housing bill also makes grant money available to communities to purchase and refurbish foreclosed homes, in effort to keep property values from dwindling, and the quality of communities from declining. If the people in these communities are at this economic low, and it is so much more difficult to get financing now, who will have the credit to buy them? Just a question.

It does not seem that this bill will really do too awfully much more than place a new burden on taxpayers and our debt should the mortgage giants Fannie Mae and Freddie Mac falter. I want to know, since we are now responsible for the bail out, will we see some type of dividend check in the mail with our next tax refund should they turn a profit? Undoubtedly, the answer is no. Those of us in my little town will continue to rotate which creditor gets paid next, until we win the lottery, find better paying careers, or someone finally finds a way to REALLY help those of us in housing crises.

David M. Herszenhorn, "Sweeping Housing Bill Signed by Bush", The New York Times

"Understanding the Housing Bill", NPR.org