The Current Real Estate Housing Market
In the spirit of bipartisanship, prominent senators from both parties on Monday announced an accord on legislation aimed at stemming foreclosure, and advancing the refinancing of over 500,000 troubled loans with funding coming from sources other than the U.S. taxpayer.
The subprime meltdown and resulting credit crisis have caused thousands of homeowners to default on loans, & with so many more in danger of loosing their homes lawmakers have had to find common ground amidst election year pressure to solve one of the most important issues facing the country today.
Although details have not been made public, the agreement has still has several obstacles it must overcome, such as passage in the senate, approval in the house, which has its own version of a housing rescue plan, and authorization from the president. Despite these obstacles, Senator & lead republican of the Senate Banking Committee Richard Shelby, (R. Ala) is very optimistic that key financing elements agreed to on Monday will dispel notions of a government sponsored bailout, thus garnering key GOP support needed for passage of the bill.
The white house has emphasized that congress has made progress regarding this proposed legislation and has not repeated any veto threats like it did recently with a similar housing rescue plan passed in the house of representatives.
According to Senate Banking Committee Chairman Chris Dodd, (D. Conn), this plan is similar to the house plan in that if certain conditions are met, the borrower may re-finance his or her own residence using government mortgage insurance if the lender accepts a maximum of 85% of the appraised value of the home as the total principle to be paid on the loan.
The difference from the house proposal lies in the funding of the expansion of government mortgage insurance. The senate deal would be capitalized by an affordable housing fund, supplied by the two GSE (government sponsored enterprises) Fannie Mae & Freddie Mac, while the house rescue plan calls for $1.7 billion tax dollars to be administered by the Federal Housing Administration (FHA).
The senate plan also calls for the creation of a new oversight structure designed to make sure that Fannie Mae, Freddie Mac, and Federal Home Loan Bank system are financially secure, which has been long supported by the white house.
Other aspects of the House legislation, such as federal support for mortgage counseling, and tax credits for first time home buyers were expected to be visited on Tuesday by the Senate Banking Committee.
This legislation appears to be gaining momentum and offers the needed timely relief for the housing market, while avoiding the further constriction of the economy with additional taxation.
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