Stephen Reddell's Katy Texas Blog

Early this morning, President Bush signed the housing bill that he had previously threatened to veto.  The bill is designed to provide assistance to 400,000 homeowners across the country that are struggling to make the mortgage payments.  It is also supposed to help stabilize financial markets. 

The measure, regarded as the most significant housing legislation in decades, lets homeowners who cannot afford their payments refinance into more affordable government-backed loans rather than losing their homes. It also offers a temporary financial lifeline to troubled mortgage companies Fannie Mae and Freddie Mac and tightens controls over the two government-sponsored businesses.

The House passed the bill a week ago; the Senate voted Saturday to send it to the president.

Bush didn’t like the version emerging from Congress, and initially said he would veto it, particularly over a provision containing $3.9 billion in neighborhood grants. He contended the money would benefit lenders who helped cause the mortgage meltdown, encouraging them to foreclose rather than work with borrowers.

But he withdrew that threat early last week, saying hurting homeowners could not wait — and even blaming the Democratic Congress’ delays in action for forcing an imperfect solution.

The bill takes several approaches to curing the ailing housing market.

It aims to spare an estimated 400,000 debt-strapped homeowners, many of whom owe more than their houses are worth, from foreclosure by allowing them to get more affordable mortgages backed by the Federal Housing Administration.

The FHA could insure $300 billion in such mortgages, which would be available to homeowners who showed they could afford a new loan. Banks would first have to agree to take a large loss on the existing loans in exchange for avoiding an often-costly foreclosure.

The plan also is designed to relieve a broader credit crunch that has taken hold because of rising defaults and falling home values. To free up safer and more affordable mortgage credit, the bill would permanently increase to $625,000 the size of home loans that Fannie Mae and Freddie Mac can buy and the FHA can insure. They also could buy and back mortgages 15 percent higher than the median home price in certain areas.

It goes far beyond addressing the current crisis, however.

The legislation overhauls the Depression-era FHA. It requires lenders to show how high a borrower’s payment could get under the terms of his mortgage. It provides $180 million in pre-foreclosure counseling for struggling homeowners.

The Treasury Department gains unlimited power, until the end of 2009, to lend money to Fannie Mae and Freddie Mac or buy their stock should they need it. The Federal Reserve takes on a new “consultative” role overseeing the companies.

The measure includes $15 billion in tax cuts, including a significant expansion of the low-income housing tax credit and a credit of up to $7,500 for first-time home buyers for houses purchased between April 9, 2008, and July 1, 2009.

This is all a serious reminder to each of us that we need to realize that just because we want something, does not mean we should have it now.  I believe that much of this crisis is due to people signing off on loans that “sounded good at the time.” Interest only, low interest rate – adjustable rate mortgages, low monthly payments, the promise that our values would increase indefinietly all sound good to everyone. But people need to be accountable for understanding the terms as well.  These programs are in place for a reason and are there to help certain people in certain situations depending on many factors.  They are not for everyone to use.  My mom and dad used to tell me that nothing is free in life.  They were right.  We need to take a good hard look at ourselves.  Ask questions before we purchase something and make certain we can afford all of it.  Wake up and realize that just because Paris Hilton has something, it doesnt mean that we can afford to have it, even if “it is a great deal” or our neighbor has it.  We, as a country, have gotten to a place where we all feel entitled to things just beacuse we want them.  I have news for you; we are not entitled to anything.  We have the things we have because the good Lord chooses to bless us.  We each are blessed differently and in varying degrees.  Do we really need the best of the best? Or, can we teach our children the value of the dollar and of hardwork still? This would require us all to make sacrifices.  What a novel idea.  Sacrifice is the thing that teaches us and our children the value of the dollar.  Furthermore, I have a real issue with the government buying out Fannie Mae and Freddie Mac’s troubles.  If we, as individuals, should be more accountable with our decisions and finances, then certainly our government should be as well, particularly when the executives of these companies are scoring major profits themselves. Where is their sacrifice? 

The bottom line for me is this: If you can’t afford something, don’t buy it until you can.  The chances are that by the time you can afford it, you may want something different anyway.  Chasing the rainbow and pot of gold is why so many people in this country are unsatisfied and unhappy right now.  Stop, slow down and think!  Then act. That is my two cents.  God bless.

Filed under: Economy/Market, Katy Family Homes