Working Toward a Solution of the "Housing Meltdown"

July 24, 2008

Yesterday, the House of Representatives approved a housing bill intended to strengthen Fannie Mae and Freddie Mac and "thousands of struggling homeowners". President Bush has allegedly withdrawn his opposition to this bill and once the Senate also passes it, and Bush signs it, it will become law. After months of back and forth over the terms and conditions of the so-called "housing bail-out bill", it is encouraging that are legislators took an actual step toward calming a jittery mortgage and housing market.

Briefly, the bill will allow FHA to back $300 billion in loans. It will provide $3.9 billion in grants to communities for buying and fixing up foreclosed properties. It gives the Treasury Department temporary authority to lend money to Fannie and Freddie or buy their stock. It will create a new government regulator for these two GSEs. It raises the limit on loans that Fannie and Freddie can buy and FHA can insure. And it will provide $15 billion in housing tax breaks and $11 billion to states for low interest loans to first time buyers, construction of low income rental housing and subprime mortgage refinancing.

It is a complicated piece of legislation and the fact that it was considered at all illustrates the major importance that housing plays in the total U.S. economy.