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Paul Kiesel
Paul Kiesel
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Housing Bill to Help Fannie and Freddie, 2 Million Homeowners Likely to Lose Homes

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Congress is close to passing a bill that is meant to stabilize the housing market and provide relief to troubled homeowners. However, the bill, if Bush doesn’t veto it (something that he is continuing to threaten if Congress doesn’t eliminate a $4 billion proposal that would provide community development grants to local and state agencies in hard hit areas to buy and refurbish foreclosed homes), is seen as falling short on the amount of homeowners that would actually be helped.

The best case scenario — or the most optimistic forecast thus far — suggests that only 400,000 homeowners would be helped by the housing bill, but that would leave well over 2.5 million out of luck. The most recent projections show that at least 3 million more homes will be foreclosed on over the next year.

Bush had been reluctant to sign off on any housing bill, at least for the last six months, but since Fed Chairman Ben Bernanke warned that the ongoing housing crisis is having a ripple effect on the economy, Bush has suddenly changed his attitude towards it. Bush is now adamantly pushing for Fannie and Freddie (relief and funds being provided to both companies) to be added to the bill. (The two companies would be able to borrow from the government in order to maintain a ready supply of affordable mortgage financing for future homebuyers.)

But many supporters and critics of the bill are seeing it as an effort being done too late and that the amount of relief being provided to homeowners as too little. Wachovia economist Mark Vitner thinks that the housing bill, “[Won’t] speed up or lessen the impact of the correction of the housing market [. . .] It’s too late for that. There’s nothing that can be done.”

What’s not too late is that our government needs to hold lenders accountable for fraud and TILA violations that allowed for this subprime bust to occur in the first place. The FBI has started investigating 21 companies that have likely committed fraud, one of those companies being the recently failed bank, IndyMac Bancorp. Even though the government turned their heads while insidious loans were being written by predatory lenders and issued to borrowers over the past four years, they need to start punishing to purveyors of predatory lending practices and allow homeowners who were taken advantage of to seek proper relief.

Bush has yet to address the issue of mortgage fraud raised this week by Bernanke; the latter explained that many borrowers had been victimized by, “unfair or deceptive acts and practices by lenders (i.e. TILA violations).” Seeing as how Bush has only spoken to reporters twice since April 29th on economic issues and the housing crisis, it might take a while to get an understanding of what the president plans to do, if anything.