Massive Housing Bill Becomes Law

Washington, DC, July 30, 2008--A massive housing bill to provide relief for roughly 400,000 homeowners and steady financial markets was signed Wednesday by President Bush.

"We look forward to put in place new authorities to improve confidence and stability in markets," White House spokesman Tony Fratto said. He said that the Federal Housing Administration would immediately begin to implement new policies "intended to keep more deserving American families in their homes."

The measure, perhaps 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 temporary help to troubled mortgage companies Fannie Mae and Freddie Mac and tightens controls over the two government-sponsored businesses.

It aims to keep an estimated 400,000 homeowners 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 legislation also overhauls the 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.