Friday, May 16, 2008

Joint Housing Deal Almost Done???

A Housing “Bail Out” Bill written by Barney Frank and forged between Richard Shelby (R-AL) and Chris Dodd (D-Conn) seems close to getting passed, though President Bush has wisely said he’d veto any measure that exposes taxpayers to potential losses. The White House has called a similar House plan a “burdensome bailout.”

The Senate package would tighten regulation of Fannie Mae and Freddie Mac, the government-sponsored companies that finance mortgages. It would also allow the Federal Housing Administration to back up to $300 billion in new loans for homeowners facing foreclosure, who would otherwise be considered too financially risky to get a fixed-rate, government-insured loan.

And under the tentative agreement with Republicans, a $600 million-per-year affordable housing fund financed by Fannie Mae and Freddie Mac would be partially diverted to cover the projected $1.7 billion cost of the FHA mortgage rescue plan.

I doubt most taxpayers were even aware that the government through Fannie Mae and Freddie Mac had set aside $600 MILLION/year for “affordable” (read very low income) housing.

But Liberal Democrats are reluctant to go along with tapping money designed to help poor people afford housing to pay for the anti-foreclosure program.

"It's a big problem for Democrats, because we've all been advocating an affordable housing fund for years now," said a senior aide, speaking on condition of anonymity because talks on the measure were ongoing. "We don't want that money to go to the foreclosure (plan). We need money for both."

Affordable housing advocacy groups unleashed a barrage of telephone calls and e-mails on senators Thursday to protest the emerging agreement.

A major sticking point has been how to insulate taxpayers from risk should homeowners who got government help default on their new mortgages.

President Bush, who has threatened to veto a similar House-passed bill, cites exposing taxpayers to potential losses as a top concern. The White House calls the plan a burdensome bailout.

Under the proposed FHA program, borrowers would have to show they could afford the new loans, while mortgage holders would have to agree to take a substantial loss on the existing loan in exchange for avoiding a costly foreclosure. The FHA would share at least half of any proceeds if the homeowner refinanced again or profited from selling the home.

The Senate developments came as Rep. Barney Frank, D-Mass., the Financial Services chairman who wrote the House bill, signaled that his hopes for a broad housing agreement with the White House were fading.

"I won't tell you I'm optimistic, but I think there's a reasonable chance," Frank told reporters after addressing a Realtors' conference. "We're still trying to keep working together."

The idiotic “stimulus package” with its “tax rebates” to those already the least taxed among us (the top 20% of income earners, who already pay over 80% of all income taxes have been excluded) is a foolish idea rooted in the failed policies of Keynesianism. We have no lack of demand for products, we have a lack of jobs creation – a Capital Gains tax and Corporate tax rate cut would’ve better served that particular problem.

Adding an ill-conceived Housing bail out to lenders and borrowers who either made bad loans or took out loans they couldn’t afford is as foolish as any plan that rewards profligacy and sloth over industry and productivity.

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