It appears imminent that the Federal Housing Relief Bill will become law within the next few days. President Bush, originally opposed to the bill's Fannie Mae and Freddie Mac bailout provisions, signaled his acceptance on Wednesday, and the bill passed the U.S. House by a substantial margin, and is headed to the Senate.
Will the bill turn around the U.S. Housing Market overnight? No, most likely. But will it send a positive signal to those considering selling or buying their homes. Possibly.
For a relatively few distressed homeowners, about to face default and foreclosure, the bill might be a lifeline. For others - first-time home buyers, for example, the tax-credit provisions might spur action. How dramatically? We'll have to wait and see.
A key provision of the bill would let the Federal Housing Administration back up to $300 Million in special loans to an estimated 400,000 homeowners who cannot afford their house payments. The new loans would be safer, more affordable, and would offer lenders an additional equity share in the houses they mortgage, rather than a costly bank-owned foreclosed home. Lenders would take a substantial discount on their original loan in order to set up this refinanced rescue loan, in conjunction with the FHA. Distressed home owners would have to qualify under the plan
The new legislation also establishes tighter lending procedures for federally-sponsored loan backers and guarantors Fannie Mae and Freddie Mac. It also $15 Billion in housing tax breaks, including a tax credit of as much as $7,500 for first-time home buyers.
In a more controversial side of the Housing Bill, the U.S. Treasury Department would offer a virtually unlimited line of credit to Fannie and Freddie, or the power to buy stock in the two companies. Investors are concerned this could dilute stock values of the companies, but supporters feel the lifeline is needed to prevent financial collapse of either or both of the giant mortgage companies. Together, Freddie and Fannie back nearly one-half of the mortgage debt in the U.S. - roughly $5 Trillion in mortgages.
See our post today@ BlogChicagoHomes.com for more info, as well as a link to Julie Hirschfield Davis's story in yesterday's Chicago Tribune.
DEAN & DEAN'S TEAM CHICAGO