Foreclosure Rescue Bill Poised To Take Off

Posted in Foreclosure, July 24th, 2008 |

The foreclosure rescue bill is poised to take off. By it both borrowers facing foreclosures and banks riddled with foreclosure related losses would benefit. Both the parties are supporting the bill for the general welfare. If all goes well than the bill will sail through the Senate on Friday 25th July. There are bumps ahead with some alterations required. The White House has been threatening to veto if certain major changes are not rewritten. But it seems that the preliminary hurdles have been crossed and the package is running on the proper tracks. The Senate has broadly supported it. This shows the general interest of the lawmakers belonging to both parties. Uppermost on their minds has been the welfare of the foreclosure victims. It must not be overlooked however that this is the election year and the economic weather right across the country is grim.

The main point of the bill will allow the Federal Housing Administration to support up to $300 billion of new loans that will be made to borrowers at risk from foreclosures. The new loans will have easier more affordable terms. The rate will be fixed for longer period. The lenders on their part will have to waive large chunks of the principal and thus avoid costly foreclosures.

Barney Frank (Democrat) chairperson of Financial Services Committee is one of the main architects of the bills. He commented that a number of leaders of the House are seeking some important revisions. These differences will be ironed out within the week. The week will be one of intense parleying at Capitol Hill against the background of Bush agreeing to sign the bill or not.

The FHA will be modernized and given a shake up. This has been a long-standing demand. A new regulator will be set up and there will be more strict control on Fannie Mae and Freddie Mac. The latter two are government-sponsored giants. The bill will also sanction $14.5 billion in relief from housing taxes. New buyers who would be purchasing properties for the first time will be getting a credit for $8,000.

The Democrats in the Congress are disunited over some important points of the package relating to limits on loans to be supported by FHA, amongst other things. Difference of opinion surrounds Freddie Mac and Fannie Mae also. The Senate wants to limit them to $625,000 but some, including the Speaker Nancy Pelosi want to cap it at $730,000.
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