BankRate.com Calls Housing Bill "Wacky"

By
Real Estate Agent with Gentry Realty

As a few of you know, I've been watching the Housing Bill with great interest. This is the Senate's version that has been debated for the past couple weeks. It's hard to follow, in part, because it's massive in scale. Washington Post reported that the current version now weighs in at 631 pages. Some feel that the Senate could have this passed in a few days. Bush is threatening a veto but there's so much bi-partisan support that the chances of that are becoming more slim.

Here are some of the major points of the bill:

  • Tax break for first time home-buyers ($4-8K). It may include those who haven't owned in three years.
  • FHA Refinancing of upside down loans. Allowing persons to take on more affordable loans.
  • Tax rebates in various sizes and flavors.

"Clown Trinket" by Andre Veron http://www.sxc.hu/profile/stocker

 

That's the raw possibilities. Now for critique... this one from BankRate.com' article - A Wacky Housing Bill.

Author, Holden Lewis, presents the scenario that persons selling their owner occupied home may be at a disadvantage against bank owned and builder properties.

The bill may apply credits to those who purchase unoccupied homes. His contention is that if tax credits are given to the purchasers of empty houses we will, in essence, reward the bank that wrote bad loans or the builder who glutted the market. Lost in the shuffle is the homeowner who has managed to keep up payments. If people receive an $8K tax benefit to buy the neighbor's empty house the owner occupied home will most likely have to be reduced by the same amount in order to compete.

His statement is this, "If Congress wants to reduce foreclosures, why are they giving lenders an incentive to foreclose? That's what that tax credit is. If empty houses have a price advantage, lenders will create more empty houses. How difficult is it to understand that?"

Other issues that the bill may contain include extras, this from BlownMortgages such as:

  • rescue refinancing for strapped homeowners 30-year fixed loan at 85% LTV of current loan.
  • more money for financial counseling.
  • stricter lender guidelines.

Now that some of the basics are finishing the political debate stage I expect the public to chime in. What's your opinion of these points?

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Show All Comments
Rainer
12,489
Teresa McDonald
EME Realty - Florence, SC
ABR, Florence and Lake City SC Real Estate

I agree the bill does sound wacky based on what you have outlined here. We need to get back to the days of the good old American Dream. The government can't fix every problem and the government sounds like it will make the problem worse in this situation.

Jul 04, 2008 05:35 PM #1
Ambassador
287,656
Tim and Pam Cash
Crye-Leike (Sango) - Clarksville, TN
Real Estate Professionals - Clarksville TN

The bill is wacky.  I agree with you Teresa - the government can't fix (or shouldnt be expected) every problem.  Ultimately when they do, we all pay in the end.

Jul 04, 2008 05:39 PM #2
Ambassador
795,472
Russ Ravary
Keller Williams Commerce - Commerce, MI
Metro Detroit homes - Michigan Real estate & Mortg

Don't we already have stricter lender guidelines now.  I think some lenders are triple checking loans.  Tax breaks for 1st time home buyers I think is a good thing though.

Jul 04, 2008 05:50 PM #3
Rainer
73,244
Pam Pugmire
Silvercreek Realty Group - Meridian, ID
Meridian Idaho Real Estate

I think that the first time homebuyer credit is great, along with Higher limits, and FHA financing available to refinance upside down loans. 

I don't think giving tax credits for vacant home is a good idea though.....why does it matter????

Leave it to the gov. to complicate things.......

Jul 04, 2008 09:35 PM #4
Rainmaker
259,719
Chuck Willman
Gentry Realty - Mesa, AZ
Realtor - Arizona - 480.292.0600

Teresa- That's the deal with problems of this magnitude... there is bound to be provisions that will come at the expense of some sector. There will also surely be some "pork" projects among the several hundred pages. I suppose it could be argued that the grand effect will be to light a fire under the market- which will result in new demand and a new higher equilibrium. I guess time will tell.

Tim- I just hope that the remedy isn't worse than the disease. If done wrong this will prolong the symptoms. However, the entire bill, if accepted and initiated, may jump start the recovery. I guess we'll have to see what final form it takes... or even if it becomes law.

Russ- That's the crux... how will the guidelines be affected? I'm wondering how the "upside down" loans will be treated... there's a whole lot to be seen how this can be worked out. I know they're going to be taking a hard look at debt load of the distessed borrowers.

Pam- Many people are going to have a tough time with the "tax credits" portion of the bill... they'll scream "who is paying this, US!" ... however, when one considers how much money is "lost" by having an entire sector (housing and finance) sit on the sidelines the math-wizzes will have to wonder this: at what point do tax credits end up creating new money? I'm more than willing to have some of my taxes go to anything that gets the economy moving- thus creating a win win. So... will this bill do it? I still have no idea.

Jul 05, 2008 01:02 PM #5
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Rainmaker
259,719

Chuck Willman

Realtor - Arizona - 480.292.0600
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