21
Housing bill passes in House
Nic Retsinas, director of Harvard University's Joint Center for Housing Studies.
To view this content, Javascript must be enabled and Adobe Flash Player must be installed.
TEXT OF INTERVIEW
Kai Ryssdal: Today, the White House announced that the president's changed his mind. He is going to sign the housing bill Congress has been working on after all.
Treasury Secretary Henry Paulson said this morning he convinced the president to set aside his objections and focus on the bailout for Fannie Mae and Freddie Mac instead. The House passed the bill this afternoon, the Senate probably tomorrow.
So now that it looks like the rescue package is going to happen, we thought it'd be smart to figure out what's going to happen in the housing market as a result.
For that, we've called Nic Retsinas at Harvard's Joint Center for Housing Studies.
Mr. Retsinas, good to have you with us.
Nic Retsinas: Nice to be with you.
Ryssdal: Summarize your thoughts on this bill for me, would you?
Retsinas: It was a better idea six months ago. It will help. It won't hurt. It's certainly better than chicken soup in terms of the housing market. It's not going to do any damage to the housing market. I think at best, which is not a bad thing, this should soften and slow down some of the continuing problems in the market. Whether it helps with a rapid recovery, that I'm a little more skeptical of.
Ryssdal: Let me ask you about some of the things the President specifically mentioned when he stated his opposition to this bill. The first is that $4 billion worth of Community Block Grants to buy up foreclosed properties. Now that that's going to actually be spent, is that going to change the market?
Retsinas: Well, it'll change in a couple different ways. One of the fundamental problems in the housing market is we have too many homes for sale. Every time a property is foreclosed, that adds one more home to the inventory. If and when this legislation becomes law, state and local governments can use these funds to acquire these properties. At the least, it'll start to eat at some of that inventory overhang in the marketplace.
Ryssdal: If I'm out there shopping for a mortgage in the next couple of months, is this bill going to make my mortgage any cheaper, lower the interest rates?
Retsinas: It won't lower the interest rate. It probably, depending if one, you have good credit and two, you do have a down payment, it will probably mean that there'll continue to be mortgage money available. So it'll probably prevent the mortgage rates from rising very much, but it's not really going to do anything to lower the mortgage rates.
Ryssdal: It's also got a provision for a new regulator for Fannie Mae and Freddie Mac, the two mortgage giants that have been in such trouble. What was wrong with the old one and why do we need a new one?
Retsinas: Well, that's been a debate for some time. Many people have agreed that having a strong regulator gives confidence to the marketplace. As we have seen over the last several weeks, investors are leery of whether Fannie Mae and Freddie Mac will fall prey to this sort of market. What the plan that has been put forward by Secretary Paulson and is likely to be in this bill says: "Not to worry. If that happens, the government will sort of step in." Having a good regulator, a strong regulator, is part and parcel of restoring confidence to these very importance institutions.
Ryssdal: And in fact, it was Treasury Secretary Paulson who said today that he convinced the President to sign this bill over the President's own objections. So now we have a package which will eventually become law that will let the Treasury Secretary decide when to invest in Fannie Mae and Freddie Mac, how much money to lend them. Is there no risk in the blank check that he's been given?
Retsinas: Of course there's a risk. Everything the government has done transfers some of the exposure of this sort of failing market to the taxpayer. I think the judgment call that's being exercised, and I think in this case it's a prudent one, that the avoidance of a much larger problem if nothing were done is much more worrisome. So the chance of some more activist intervention as opposed to waiting for the sky to fall on the housing market I think is probably a good choice.
Ryssdal: Is this going to stabilize the housing market as the White House said today?
Retsinas: Well, it's going to help. The larger issue in the housing market as I indicated is the glut of homes that are for sale, both overbuilt as well as foreclosed homes. We have to work that out. Both borrowers and investors have to have some confidence in the market and that it's not going to get worse. This is an effort to bring some stabilization to that market.
Ryssdal: Nic Retsinas runs the Joint Center on Housing Studies at Harvard University. We reached him actually on Cape Cod today on vacation. Mr. Retsinas, thanks for your time.
Retsinas: Nice to be with you.
About the author
Kai Ryssdal is the host and senior editor of Marketplace, public radio’s program on business and the economy. Follow Kai on Twitter @kairyssdal.Pages
This part of the bill is total bs. Why should people who bought out of their means get to keep their McMansions at a discounted price. The govt. should have let the pieces fall where they may.
Read this article:
The "bailout" part of the housing bill comes from the section allowing homeowners to rewrite their existing mortgages into 30-year fixed mortgages for an amount equal to 90% of the market value of their homes. Obviously, this provision helps those with mortgages for over 90% of the market value of their homes. However, 10% is not all that's at stake here, given that many homeowners at 100% mortgages based on much higher market values. So, someone with a $300,000 mortgage on a $300,000 house whose value has slipped to $250,000 can swap for a mortgage for $225,000. Sweet, huh? Except that your lender has to agree. So of course I'm interested in knowing whether lenders will take the bird in the hand of the $225,000 mortgage (which must be qualified for and will be guaranteed) rather than take their chances in the foreclosure process that they will get a better deal. It may be that bill saves all parties these transaction costs and creates a win-win situation, but if that's the case, wouldn't the parties have negotiated a settlement on their own? Is the federal guarantee really the deal-maker? For homeowners to take advantage of this renegotiation, their mortgage payments must be 30% or more of their monthly income, but they must be able to qualify for the new loan. I have seen figures that this provision would help maybe 300,000 out of the 3 million facing foreclosure. (Borrowers also must be residents of the house, not "flippers" or other investors.)
Source: TrackBack URL for this entry:
http://www.typepad.com/t/trackback/38673/31621042
C'mon. Do they really think they can hoodwink the renters by including a measly $7500 (or 10% of home price whichever is less) into the bill? Remember this is not even a giveaway like they are doing for the homeowners. And btw, what the hell are they thinking with the 10% of home value max? Like you can actually buy a home for 75000 these days? Maybe in some dumpy rust belt violent neighborhood. Of course, the 7500 is actually going right into the seller's (read mortgage bank) pocket. You as a renter have to pay it back. They just don't give a flying crap for renters.
Dido Dido Dido! I WILL NOT PLAY THIS GAME! As renters in suburbia New York, my wife and I have been waiting to buy our first home for years. We each have 6 figure salaries and plenty in the bank. We STILL CAN NOT AFFORD anything but a complete DUMP. Especially with property taxes that average about $17,000. per year! And what does my government due for me? $7,500 bucks (if that), that I don't even get to keep! My new hobby is to offer hundreds of thousands below asking price on every house we go see. It's great fun! You should try it!
This bill may not be so bad for first time home buyers. Please see the article I read today online and the source for same below. Housing Bill: New Help for First Time Home Buyers I wasn�t paying close enough attention to this housing bill. I thought it was all about mortgage re-negotiation and foreclosure prevention (and it certainly offers help in those important areas). But I was surprised to read in today�s New York Times that it also aims at stimulating housing demand among first time homebuyers by offering a tax benefit that is essentially a 15-year interest-free loan (up to $7,500 depending on your tax status) for first time homebuyers purchasing a home between April 9, 2008 and June 30, 2009. The benefit begins to phase out for single people earning more than $75,000 or couples earning more than $150,000. This loan (officially a tax credit/refund with required repayment over 15 years) will not make a huge difference for the average first-time home buyer, but it could have a meaningful impact on housing affordability and asset-building for lower-income home buyers. The critical task will be to make sure that the beneficiaries don�t look at this as a windfall and simply use it to spend above their means without recognizing that it will need to be paid back. What I hope is that asset development practitioners and community-oriented financial professionals can help first-time home buyers set up appropriate savings or investment vehicles that allow them to put the money away, earn investment/interest returns, and have sufficient funds available in future years to make the required repayments. No-interest loans will surely help grow the pool of capital available for asset-building strategies, ranging from home repairs and maintenance to small business development to retirement savings. With some creative thinking, financial professionals (especially in the nonprofit asset development field) could play a huge role in helping new homebuyers maximize the value of this opportunity. We could design initiatives in which income-eligible new homebuyers receive an additional financial incentive for putting their refundable credit into a restricted investment vehicle like an IRA or a 529 college savings plan or an IDA-like custodial account. That might only impact a select number of beneficiaries directly, but it could build awareness within the broader population of new homeowners about how to responsibly invest the refundable tax credit. I could imagine some financial institutions being excited to partner on such initiatives. Does this temporary legislation allow enough time for the field to respond in creative ways? We�ll see. Source: http://assetalmanac.wordpress.com/2008/07/25/housing-bill-new-help-for-f...
The President will sign this bill and yes it is open ended unlimited cash to bail out these thieves. President Bush realized the economy could collapse even before he leaves office, therefore he will leave the next President and all future generations with all the problems. I feel sorry for who ever wins the next election, they are inheriting the worst economical shape the US has been in since the Great Depression.Oh and by the way we are on the hook now for up to 5 trillion in debt not the rich Countries and rich people which were holding the debt; it has been shifted over to us the taxpayers with this vote. Bush just pretended not to want this bailout all the while he couldn't get his pen out of his pocket fast enough, now he can stop sweating hoping to get through the next 5 months with his finger in the dike so he can pull it out and run.
I live in Yorba Linda, CA. The median home price is $819,000. Our combined family income is $200,000. I have a credit score of 795, and we have $80,000 towards a down payment, documented income, etc etc - and WE CANNOT AFFORD A HOUSE. I cannot believe that this is American government doing this to it's own citizens. It's just disgusting.
Boy when the dog wages his tail little brother feels it. Prices in Canada are stalled...nothing is selling...I would personally say buy gold and silver and wait this one out??? Ron Paul is excellent...If I were a US citizen I would vote for he.
I am very disappointed in learning the housing "bail out" bill will soon be a law. This only further delays my hopes of being a first time home buyer. We have two modest incomes and a reasonable down payment and still cannot afford the monthly payment on a medium single family home. I agree with other comments made to NOT buy until the government steps in and deflates this bubble. Sadly, first time home buyers are suffering.
Pages
