May 20, 2008- Foreclosure legislation almost ready in the Senate.
Senators are informing that they are advancing in the bi-partisan task of structuring a program to avoid foreclosures and assist 500,000 distressed homeowners in refinancing their mortgages.
The discussions have not ended and nothing has been released yet. But the Legislature is trying to do something about the housing and foreclosures crisis, before it gets out of hand and pulls the whole country into a recession.
They announced that taxpayers would not be affected by the program. President Bush has threatened to veto a similar agreement voted by the House, which puts forward a different rescue plan.
Republican Senators are split on the agreement. Some have expressed their fear that, at the end, the program would be a bailout of investors, speculators, banks and lenders, at the expense of US taxpayers. The Senate plan is similar to the House bill already approved. Both are basically an expansion of FHA or government insurance on mortgages. Both require the lender or holder of the mortgage to accept a payment of 85% on the appraisal value of the property, as full payment. FHA (Federal Housing Administation) would use a 1.7 billion federal fund to boot the program.
In the Senate version, Fannie Mae and Freddie Mac, government created mortgage corporations, which stocks are publicly held, would capitalize a special fund for this purpose.
The proponents of the Senate program estimate that it will speed the downward correction of home prices, accelerate the bottoming of their values, and stabilize the market. At the same time it would prevent people from loosing their homes.
Another part of the proposed legislation would set up an oversight mechanism, to monitor Fannie Mae, FHA and Freddie Mac future financial health.
The House has not voiced opinion on the subject but a White House spokesman affirmed that it will look carefully at the plan, once it was approved by the Senate, with special consideration to FHA expansion not being footed by taxpayers and is done in a responsible and effective way.
Other points which are being considered are the tax credits proposed for first-time-home-buyers.
As long as we, the tax payers don't end up paying the bills and bailing out the big banks, hedge-funds, and Wall Street billionaires, I am OK.
I'll keep you posted.
Henry B. Nathan is a Florida Realtor at United Realty Group Inc.
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