Housing Bill: The New And The Old Of It All

[from Diana Olick's blog, Realty Check, at www.cnbc.com]

In a vote of no confidence in the housing market, President Bush this morning revoked his threat to veto the housing rescue bill, which is making its way to a vote on the House floor today.

He is still opposed to the $4 billion in community block grants to buy foreclosed properties that’s included in the bill, but, as White House Press Secretary Dana Perino said in an unscheduled call to reporters, “This is not the time for a prolonged veto fight.”

Tell me about it. Apparently Treasury Secretary Henry Paulson had to convince Mr. Bush to drop the fight. “This is a very important message that we are sending to investors around the world,” he told reporters today. Yep, no worries there.

The housing rescue bill is enormous, especially since it just got a whole new provision to backstop Fannie mashed into it last week. It would allow the Treasury to open up a new line of credit to the two as well as buy equity in them. Yesterday the Congressional Budget Office estimated that if F and F had to use all that Treasury cash, it could cost you and me about $25 billion.

The bill still has the same old other stuff in it that lawmakers have been arguing over for eons:

- Allows the FHA to guarantee and additional $300 billion in new loans for at-risk subprimers
- Overhauls Fannie and Freddie oversight
- Overhauls the FHA
- Sets the conforming loan limit at $625,000 (up from $417,000)
- Creates an affordable housing fund from Fannie and Freddie dollars
- 10% tax credit for first-time home buyers
- and a whole bunch more tax provisions

We’re told that the House chiefs have been negotiating all this with the Senate chiefs as well as the Treasury Secretary, so clean passage at this point is more likely than it has been in the past. Notice how I couched that, given that any lawmaker can throw any wrench into it at any time. Who was that old Russian comedian who always said, “I love this country!”

[The Real Blog's take on the market gyrations, interest rate hikes, and this huge housing relief bill...

Housing is in a world of hurt, and you would have to be living in the Santa Clara riverbed with no access to the media not to know that. Oh, that's right, there are some living there as a direct result of a very personal housing crisis, so they know it too!

In every market, there is opportunity. Home prices have come down a lot, and there is still attractive home interest rates that make a purchase rational. So far, there are FHA programs that make it REALLY attractive for some first time home buyers to buy right now. Investors are looking for long term wealth creation and looking to scoop up some residential deals to be rentals. There are the usual seller motivations that come up (relocation, divorce, death, economic change either for the good or the bad).

There are challenges, of course. People in the housing market have gotten really used to artificially low interest rates. Those same really low interest rates have been one of two primary reasons for the housing bubble in the first place. The second reason being lax loan oversight and underwriting, which allowed people to buy homes based on no verification of income, debt, or ability to repay the loan.

It's going to take some time for the housing system to work through the excesses. Since this is an election year, you can depend on bad policy being voted on and passed at the governmental level. Stay tuned.

~~ Ray