U.S. Senate Passes Housing Bailout Legislation

Posted In: Bailout, Foreclosures, Homeowners, Housing, Local Government, Mortgages, Real Estate Agents, Subprime, U.S. Government

“Progress” continues to be made on the next major bailout. According to Bloomberg tonight:

The U.S. Senate passed a $300 billion plan to help thousands of Americans keep their homes and tighten regulation of Fannie Mae and Freddie Mac in an effort to ease the worst housing slump since the Great Depression.

The legislation, approved 63-5 today, would let an estimated 400,000 struggling homeowners avoid foreclosure by refinancing their subprime mortgages into fixed-rate loans backed by the government. The measure also offers tax incentives to potential homebuyers and sets aside $4 billion to help communities buy foreclosed properties.

Chicago’s Mayor Daley moonlighting as a real estate agent? Yeah, I guess I can see it…

“‘Got House?’ Oh, I’ll give you house!”

Source:

“Senate Approves $300 Billion Plan to Stem Housing Foreclosures”
Brian Faler
Bloomberg, July 11, 2008

Sphere: Related Content

Ames Tiedeman Says:
July 12th, 2008 at 4:15 pm

This bill will give little help. Foreclosures will increase in 2H, 2008 and then accelerate into 2009. This mess is far from over. The U.S. Government cannot halt this tidal wave of pain.

Editor Says:
July 13th, 2008 at 11:35 pm

Thanks for the comment Ames.

“This mess is far from over.”

That’s what it looks like. Conisder the following from Bloomberg on July 10:

“The foreclosure problem is getting worse and will stay with us well into the next decade,” Mark Zandi, chief economist for Moody’s Economy.com in West Chester, Pennsylvania, said in an interview. “The job market is eroding and homeowners have less equity. Lenders are much less willing to work with you if you’ve got negative equity, and you’re more likely to give up your house if you’re deeply underwater.”

Foreclosure activity is the highest since the Great Depression of the 1930s, said Rick Sharga, RealtyTrac’s vice president of marketing. Home prices, which fell the most on record in April, according to the S&P/Case-Shiller index of 20 U.S. metropolitan areas, have created a cycle where shrinking equity drives homeowners into foreclosure, which in turn further pushes down home prices, Sharga said.

1 Million Homes

“We’ll have 1 million bank-owned properties by the end of the year,” Sharga said in an interview. “That will represent between one-fourth and one-third of all home sales.”

About 53 percent of borrowers with subprime loans, those with poor or incomplete credit histories, will have negative equity in their homes at the end of the year, and the number will rise to 63 percent in 2009, New York-based analysts at Credit Suisse led by Rod Dubitsky said in an April 23 report.

Tighter underwriting standards mean borrowers whose adjustable-rate mortgages reset to higher payments can’t refinance their loans, Credit Suisse said. About 2.7 million subprime borrowers will enter the foreclosure process by the end of 2012, with a peak of new foreclosures in the third quarter this year, the analysts said.

About $3.5 trillion in homeowner equity has been wiped out since the spring of 2006, when housing prices were at their peak, Zandi said.

Glut

Rising mortgage defaults and auctions of foreclosed properties are adding to a glut of unsold homes and prolonging the housing slump. Efforts by the U.S. Congress to insure as much as $300 billion in refinanced mortgages and save up to 2 million borrowers from foreclosure can work only by “slowing down or reversing home price declines and equity deterioration,” Credit Suisse said.

“Foreclosures Rose 53% in June, Bank Seizures Tripled (Update3)”
Dan Levy
Bloomberg, July 10, 2008

Psychic Advice Says:
July 14th, 2008 at 3:15 am

Thanks for the great info. I hope you’ll follow this with some more great content.

Editor Says:
July 14th, 2008 at 12:52 pm

Thanks for the comment Psychic Advice. I aim to please. There will be plenty of housing-related posts in the near future, I’m sure…