Wednesday, July 30, 2008

Housing Bill Signed By Bush; Now What?

President Bush signed the housing bill this morning, so the biggest housing legislation in decades is now officially on the books. The bill finally came together when opposing sides were able to agree that the bill as is was better than nothing. Republicans got their Fannie Mae and Freddie Mac support and Democrats got their foreclosure bailout. Neither side is 100 percent happy, but then, when does that ever happen in politics? So now that this housing bill is official, what happens? Can we expect to see dramatic changes in the housing market for the better now? Well, not exactly…

It is no secret how I feel about the housing bill, and if you aren’t familiar with my blog, read this prior post on the housing bill to get caught up. There are also officials who share my same discontent for the bill. According to BusinessWeek, a top official in the Bush administration admitted that this housing bill will probably help fewer people than the previous expansion of the FHA. This new housing bill is estimated to help around 400,000 people, compared to the previous FHA bill, which was slated to assist 500,000. This news, of course, made me even more upset because the FHA bill certainly didn’t live up to its billing (see previous post about FHA Secure loans). It turned out that many of the people the FHA bill helped were people who really didn’t even need the help, but instead elected to take a nice little government (read: taxpayer) subsidy for their mortgage. So if this new housing bill is going to help even fewer people, and cost us more, then pardon me if I don’t exude excitement.

I’m not sure of the exact cost of the bill, and to be honest, no one does. It ultimately depends on how many insured loans go bad and whether or not Fannie and Freddie will need the assistance that we are now offering. Estimates from the Congressional Budget Office put the price tag on the Fannie and Freddie package as high as $25 billion. As far as how many of the $300 billion in new FHA loans will go bad, your guess is as good as mine, but I’d assume it will cost us a few billion. In addition, there is a $3.9 billion foreclosure bailout provision included, along with a tax credit for first time homebuyers. I don’t know about you, but all the uncertainty of potential costs is a little scary to me. Sure, officials have made estimates, but those are just that: estimates. This is the equivalent of dropping your car off at the repair shop and getting a repair quote of between $500 and $10,000, but in order to get the repairs done, you have to agree to pay the final tab, regardless of where it might end up. I guess when you have debt approaching $10 trillion, what’s a few billion more?

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