On Wednesday the Bush administration, which had opposed certain aspects of an important housing bill, reversed its position on the basis that a protracted veto fight was not in best interest of public and for the economy. This reversal would create a clear path for legislation (HR 3221) that aims to provide crucial support (if needed) for the nation's largest mortgage companies & GSE's, Fannie Mae & Freddie Mac, and help thousands of homeowners in desperate need of refinancing their home loans.
This bill, expected to pass this week in the House of Representatives could be ready for presidential signature as early as Friday.
The Bush administration largely objected to a 3.9 billion dollar provision that allows local governments to purchase and restore foreclosed & distressed properties. Debate between lawmakers over this provision had stalled the legislative package for at least month, until additional legislation was added to provide timely support for Fannie Mae and Freddie Mac.
This bill would also provide the Federal Housing Administration (FHA) the ability to insure up to $300 billion dollars worth of mortgages, allowing homeowners in danger of foreclosure to refinance their homes with cheaper government backed loans. This bill also allows lenders to take a financial loss on these refinanced loans in exchange for collecting on the loan rather than face costly foreclosures. Lastly, this legislation includes a plan to modernize the FHA and create a regulatory agency to oversee Fannie Mae and Freddie Mac.
Treasury Secretary Henry Paulson has stressed that the overall package was necessary to help stabilize the housing and credit markets, and has voiced this opinion publicly on Capitol Hill and in private with congress in recent days.
If this legislation passes in a timely manner, it may provide the mortgage industry, financial sectors, and housing market the confidence needed to mount a sustained economic recovery much more quickly than with out it.