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The President's Reluctant Signature

Posted by: Chris Palmeri on July 30, 2008


President Bush signed the big housing bill today. He didn’t love it and put his signature on it privately rather than in a big press event in the Rose Garden. There isn’t even a mention of the bill, the largest housing initiative since the Great Depresssion, on the White House’s official Web site.

There’s something in here for just about everyone, which is why the President didn’t like it. Here are some details you may have missed in all the coverage, courtesy of the California Association of Realtors:

The law will help an estimated 400,000 homeowners facing foreclosure by allowing them to refinance their current mortgages with a Federal Housing Administration (FHA)-backed loan.

The bill lifts Fannie Mae and Freddie Mac loan limits to the greater of either $417,000 or 115% of an area’s median home price, up to $625,500. That’s a big help to homeowners in high cost markets.

There’s a first-time home buyer tax credit, which gives first-time buyers a tax refund worth up to 10% of a home’s purchase price, up to a maximum of $7,500. The refund is actually an interest-free loan and the homeowner is required to repay it in equal installments over 15 years.

There are now minimum requirements for mortgage brokers including fingerprinting of loan originators and a nationwide licensing and registration system.

The legislation cracked down on “nonprofits” that were allowing buyers to qualify for FHA loans with no money down by transferring funds from the home seller to the buyer to use as a down payment. Buyers can still accept down payment assistance from family, employers and other nonprofits.

The Community Development Block Grant Programs provides $4 billion for communities to purchase and refurbish foreclosed homes.

Reader Comments

Rational expectations

July 30, 2008 4:11 PM

"The bill lifts Fannie Mae and Freddie Mac loan limits to the greater of either $417,000 or 115% of an area’s median home price, up to $625,500. That’s a big help to homeowners in high cost markets."

Um, no. The current threshold is 729k or 125%. This means that in many high-priced areas, homes could be financed this year with loans of up to $700,000. Median prices have fallen much faster than the price for expensive homes. This means that in many expensive areas, it will be extremely difficult to get a mortgage next year.

The June median existing home sales price in California (according to CAR) is $368,250. 115% of this is $423,487. But the median in North County San Diego is $490,000. This means that almost half the houses sold would be too expensive to finance through GSE loans, unless someone brings lots of cash to the table. In short, there will be tremendous downward pressure on prices in high-price areas.

Jim D

July 30, 2008 6:46 PM

The same group (the OMB) that estimated that 400,000 homeowners would receive help, also estimated that 120,000 homeowners would still lose their homes despite that help, costing the taxpayers billions and helping only 280k homeowners keep their overpriced McMansions. It would be nice if the press mentioned this while mentioning the 400k helped. A 30% failure rate for help isn't anything to brag about.

This is a bill to help banks, not homeowners. You can tell, because banks are the ones getting the checks, and they are the ones who get to pick which homeowners get this dubious help.

If this was actually a plan to help homeowners, either the government or the homeowners themselves would get to pick who got "helped".

The first time buyer government loan (it's not really a tax credit if you have to pay it back) has an income restriction that you didn't note.

Lastly, at a time when Fannie and Freddie teeter on the brink of insolvency, do you really think now is the time to increase their risk exposure via larger loans?


July 31, 2008 4:51 AM

With regard to the passage of the Housing Bailout Bill, I just want thank you Mr. Honorable President for saving my gluteous in these very difficult times for our great nation whose kind, generous, and merciful people not only bailed out BearnStearn, IndyMac, and other free enterprising banks, but also help flippers like me, other friendly appraisers, generous mortgage lenders and real estate agents/brokers. In this new world order of Global economy, NAFTA, and free-markets, the average middle class working-stiff have resoundingly answered YES to the famous question, "Are you better off today?" While 90% of this nation's wealth is controlled by 10% of its people, it is comforting to know that 95% of the congressmen are multi-millionaires who represent us working-stiffs. Those numbers are better than the Roman Senate before it collapsed in its final days. Mr. Honorable President, I respectfully request you sign a bill granting free money to all senior citizen whose savings have been wipe-out by the high inflation in gasoline, grocery, utility, rent, insurance and health care. If taxpayers can give Big Oil millions in oil-depletion allowances and other money incentives; subsidize milk and corn; free loans to Big Wall Street banks; surely it can pay themselves some of the same loot. On behalf of the American people, I thank the Republican and Democratic politicians.

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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