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How the new housing bill might help
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Bob Moon: More ominous housing numbers this morning. Foreclosure filings doubled last quarter compared to a year ago. One in every 171 households nationwide is now in some stage of foreclosure. In Stockton, California, that number hit one in 25. Will the housing bill moving through Congress help? Here’s Marketplace’s Dan Grech.
Dan Grech: Tomorrow, the Senate is expected to vote on a massive housing bill. A key provision would insure up to $300 billion in refinanced mortgages.
Under the plan, banks would have to voluntarily take at least a 15 percent write-down in the value of adjustable rate loans. In exchange, the new mortgage, a 30-year fixed loan, would be backed by the federal government.
The government estimates half a million loans will be refinanced. John Bancroft edits Inside Mortgage Finance, a trade publication. He estimates the number will be much lower.
John Bancroft: There won’t be a big surge of activity right away, but six months down the road, hopefully you can see more borrowers finding a way out of their financial problems.
Bancroft says the program won’t solve the housing market’s most immediate problem: a glut of homes for sale. Over the next year and a half, Lehman Brothers is expecting excess inventory will drive down prices another 15 percent.
I’m Dan Grech for Marketplace.
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