Filed under: Politics, Housing, Recession
My Ph.D. adviser David E. RePass, professor emeritus at the University of Connecticut, used to frequently recite an axiom about the U.S. Congress that rings true, regardless of era, or circumstance.
“Congress does not react, unless not reacting will result in the wrath of the American voter.”
Well, concerning housing, it looks like Congress sees the wrath of the American voter ahead because the legislative body is starting to react.
Two measures working their way through Congress might ease the housing crisis. The first, a bipartisan Senate measure, is a modest step to address the rise in home foreclosures, The New York Times reported Friday.
The bill, which has bipartisan Senate support, includes a new, standard property tax deduction for up to $1,000/$500 for all couples/individuals who file taxes, not merely those who itemize their deductions, and provides $10 billion in tax-exempt bonds for local housing agencies to refinance loans and provide mortgages for first-time buyers, among other provisions, The Times reported.
Meanwhile, in the U.S. Home of Representatives, where the Senate bill is headed, U.S. Rep. Barney Frank, D-Massachusetts and chairman of the Financial Services Committee, will hold hearings on a plan to provide up to $300 billion in federally-guaranteed loans to help up to 1.5 million homeowners at risk of default, The Wall Street Journal reported. (Subscription required.)
Under Frank’s proposal, borrowers would have to certify that they’re truly in danger of default and not intentionally defaulting when a default could be avoided, simply to take advantage of more-favorable mortgage terms that the Federal Housing Administration would guarantee, The Journal reported. (Subscription required.)
Political Analysis: If Democratic Party history and case study is any precedent, look for Rep. Frank et al to win concessions from the Senate to broaden eligibility assistance beyond what the Senate bill provides. However, it’s highly unlikely Rep. Frank will be able to secure a $300 billion FHA guarantee provision. A $125-150 billion guarantee — $62.5-75 billion each year for 2008 and 2009, with a more-rigorous means test to identify those homeowners truly in danger of default, is more likely. Initially, the talk inside the beltway was that President Bush would oppose the FHA guarantee. But given the deepening housing slump — and the electoral pressure incumbent Congressional Republicans are likely to face in the 2008 election absent an assistance program — Bush may very well sign the measure.
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