House Approves Bailout of Fannie Mae, Freddie Mac and the Rest of the Housing Market

As expected, the House gave the go ahead for the passage of their bailout package now that President Bush rescinded his veto threat. Now, all we need to complete the insanity is the approval of the Senate, which shouldn't be much longer down the road. The vote was 272-152.

The bill includes such provisions as allowing the government to insure up to $300 billion in refinanced mortgages, establishing a tax break of as much as $7,500 for first-time homebuyers and creating a new regulator to oversee government-sponsored enterprises Fannie and Freddie. (source: MarketWatch)

Major elements of housing bill...

• A backstop plan for Fannie Mae and Freddie Mac that extends an unlimited line of credit and gives the government the authority to buy the companies' stock. My Comment: They just gave the two FMs an unlimited grab into your wallet. Just in case that isn't enough, the government can use your money to buy up their stock.
• Funds to insure up to $300 billion in refinanced mortgages. My Comment: Good, it will cost us all more if more people default as expected.
• A tax break of up to $7,500 for first-time homebuyers. My Comment: And this is expected to provide a rush of new homebuyers to spark the housing market? These people cannot even afford to pay for gas to get to work or to put food on their tables anymore. That's omitting the fact that lender guidelines have had their sphincters so tight that they probably couldn't get a loan anyway.
• A new regulator for Fannie and Freddie. An affordable housing trust fund financed by Fannie Mae and Freddie Mac. My Comment: Like a new regulator is going to be able to fix things or even prevent them. The current regulations haven't even been enforced yet.
• $4 billion in emergency assistance to communities to buy and rehabilitate foreclosed homes. My Comment: Uncle Sam's cousins (aka state and local governments) just became the new landlords and property flippers. Watch out real estate investors, your local government just became your competition and they are spending your money to compete.

The good news is that we still have some sane politicians on the hill. Take House minority leader John Boehner who called the bill for what it is...a bail out of "scam artists and speculative lenders" at the expense of taxpayers.

Of course, Barack Obama had to make his own ludicrous statements known, praising Bush for dropping his veto threat and pushing his own plan for action on the housing front.

"We cannot wait for a million more foreclosures before taking additional action to help struggling families and strengthen our economy," Obama said in a statement. (My Comment: Like this or any of your actions are going to prevent the millions of foreclosures coming? You just have to love politics, right?)

"That's why I've also proposed a second stimulus of at least $50 billion with energy rebates for families struggling with high gas prices, relief for states facing budget cuts, and additional measures to protect homeowners from foreclosure," Obama said. (My Comment: Why exactly is Obama thinking this way, very anti-Democratic. maybe because he has seen the effects of the recent stimulus checks? Two-faced? You decide.)

I haven't seen the final version of the bill the House passed, but I am guessing it had most, if not all, of the harmful provisions in it that I mentioned in this post. Some things I failed to mention in my earlier post were the elimination of Down Payment Assistance Programs (DAPs), another good program abused by many to its detriment, and the second lien amendment, which is the $300 billion dollar provision above.

The second lien amendment is where first mortgages are insured, but must be written down to 90% of the current appraised value of the home before being refinanced. That means second lien holders get wiped out. Any wonder why so many lenders have dropped second mortgages, frozen HELOC withdrawals, unilaterally reduced HELOC amounts, etc.?

So, now we have in place the Housing and Economic Recovery Act of 2008, HR 3221. All that is left to complete the debacle is the Senate's approval and that is slated for later this week.