Making Sense of the Housing Stimulus Bill

Provisions of the relief bill

Courtesy of The Associated Press

The housing bill Congress plans to send President Bush would:

> Give the Federal Housing Administration $300 billion in new lending authority and relax standards to provide affordable, fixed-rate mortgages to an estimated 400,000 debt-ridden homeowners. Any losses would be covered by an affordable housing fund financed by Fannie Mae and Freddie Mac, the government-sponsored companies that finance mortgages.

This is pretty self-explanatory. I'd rather the guv'ment pump in $300 billion into the mortgage industry than make qualms about a "bailout." Am I happy about the tax implications? Of course not. But for the greater good of the economy? So be it.

> Allow the Treasury Department temporary authority to lend money to Fannie and Freddie or buy their stock to avert a collapse of one or both of the mortgage giants. The authority would expire on Dec. 31, 2009.

Another major step to stem the tide. The operative word here is "lend," and I'm hoping that in 18 months, we'll see the housing market recover enough so that the U.S. Treasury can recoup some of those resources, and you know, apply it to more bailouts. Just kidding on that last part.

> Create a new regulator and tighten controls on Fannie and Freddie, including power for the regulator to approve pay packages for company executives. Create a new affordable housing fund drawn from their profits. Permanently raise the limit on the loans they may buy to $625,000 in the highest-cost areas. Allow them to buy loans 15 percent higher than the median home price in certain cities.

Still too low in San Francisco, but the fact that it's permanent is a small victory nonetheless. Beggars can't be choosers.

> Provide $3.9 billion in grants to the hardest-hit communities for buying and fixing up foreclosed property.

This is what troubles (pains?) me. "Hardest-hit?" To whose standard? I understand that squatters and distressed markets are never a good thing, but really -- who's fault is that? Again, for the greater good, I guess I'll take it. But fixing up foreclosed property that irresponsible buyers left a mess is asinine. Who's going to reap those rewards? More irresponsible buyers? Sounds like a vicious cycle to me.

> Modernize the FHA and allow it to back loans for riskier borrowers. Permanently increase the size of loans the agency may insure — currently set to revert to $362,790 by the end of the year — to $625,000 in the highest-cost areas. The agency could insure loans 15 percent higher than the median home price in certain cities.

> Forbid the FHA from insuring mortgages in which the borrower's down payment is paid by the seller, beginning on Oct. 1, 2008. Place a one-year moratorium forbidding the agency from charging premiums based on the riskiness of the homeowner, until Oct. 1, 2009.

A very good thing. If you allow buyers to acquire property with no money down, we'll run the risk of getting into the same mess that spurred this housing bill and mortgage crisis in the first place. Come to think of it, how are they buyers if they aren't opening their check books anyway? You're less like to default on a mortgage if you actually invested some hard-earned cash into it, right?

> Provide $15 billion in housing tax breaks, including for low-income housing. Give a credit of up to $7,500 for first-time home buyers who purchase residences between April 9, 2008, and July 1, 2009. Allow people who don't itemize their taxes to claim a $500-$1,000 deduction on their 2008 property taxes.

Again, very nice. This is what tax breaks should be doing -- offering an incentive for an invested buyer to make a commitment. Further, allowing deductions for the average tax payer helps the buyer even more come tax season.

> Give states an additional $11 billion in tax-free municipal bond authority for low-interest loans to first-time home buyers, construction of low-income rental housing and refinancing subprime mortgages.

I'd like to see how this bond is dispersed in California. San Francisco does have subprime mortgage, but alas, we'll probably be last in line while depressed counties like San Bernardino, San Joaquin, and Sacramento wipe the coffers clean.

> Offer protection from investor lawsuits for mortgage holders that modify loans to borrowers who are in default or about to default.

A huge help for borrowers who want to stay in their homes, but cannot afford a higher mortgage due to a recasting of their interest rates. We really should not be penalizing homeowners who are diligently trying to make their mortgage payments, but just need a better financing plan.

> Provide $180 million for pre-foreclosure counseling and legal services for distressed borrowers.

This just warms my heart. Contrary to the stigma of people just walking away from their homes (read: responsibilities), there is a select few who want to keep their homes. I'm glad help will just be a phone call away.

The bill is H.R.3221.