The U.S. Congress approved on Saturday a major housing market rescue bill. The Senate and House took immediate action on the 694-page HR 3221 bill – that proposes, effective October 1, $300 billion in loan guarantees to help an estimated 400,000 families who face losing their homes to foreclosure.
Included in this bill is also a $4 billion measure for neighborhood stabilization that would help cities and localities to deal with the growing number of vacant and abandoned properties left behind from foreclosures.
The Senate approved the bill in a 72-13 vote that President Bush is expected to sign without delay.
The bill also offers temporary, contingency financing for Fannie Mae (FNM) and Freddie Mac (FRE) and creates a new regulator for the GSEs including more authority from the Federal Reserve which will play a greater role supervising the duo’s capital.
Texas Republican Sen. Kay Bailey Hutchison, notes Reuters – said the housing bill had positive aspects. But she added, “I am troubled by the inclusion of an unlimited U.S. Treasury credit line to Fannie Mae and Freddie Mac” and possible government stock purchases.
Sen. Hutchinson’s comments would make sense — only if we exclude the fact that in the absence of the mortgage giants, the mortgage market would practically shut down. Both ailing GSE’s, together own or guarantee roughly half of the nation’s $12 trillion outstanding home mortgage debt. Considering the fragile state of the economy and the meltdown of the housing sector, I don’t think- that would be such a good economic as well as political move.
Let’s keep in mind, the housing devastation was also caused by lax policies and not enough oversight out of Washington. So, the obligation to do what is right from Washington to fix it, is certainly there.
This bill should mark the turning point in the house sector’s downturn and the country’s credit crunch.