When the House sat down to vote on the contentious housing loan package, which involved $300 billion in mortgage loans, the results was not at all surprising. In an effort to minimize the damage caused by the subprime meltdown, lawmakers approved a plan this Thursday that will somehow help manage the enduring housing crisis.
The said bill, authored by House Financial Services Chairman Barney Frank of Massachusetts, will allow the Federal Housing Administration or FHA to back new mortgage loans amounting to about $300 billion. One of the conditions requires lenders to reduce the amount of the principal mortgage to an amount not exceeding 85 percent of the property’s present appraised value. In the event that these FHA-backed loans default, only the remaining balance on the principal shall be paid.
It is estimated that about 500,000 borrowers will end up being insured, thus avoiding foreclosure. Over 1.4 million loans will most likely be qualified for the program, which would probably cost $1.7 billion in taxpayers’ money.
Most of the opposing lawmakers pointed out that the said expansion program is actually a bailout for investors, speculators and lenders who committed professional misconduct. In addition, critics of the bill remarked that the same lenders will probably pass high-risk loans to the FHA.
On the other hand, the housing bill also contained elements that might attract support from the opposing Republicans and the White House. These are the “more stringent oversight of Freddie Mac and Fannie Mae” and modernization of the present guidelines followed by FHA. Still, the White House is firm on its decision to veto the bill. Analysts see this decision of the White House to be tactical in nature.
Whatever the outcome, many Americans are hoping that the federal government is sincere in its efforts to put an end to this housing nightmare that has caused millions of people to lose their homes to foreclosure.
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