The New York Times reports this morning on proposed government measures that are aimed at helping the current housing market. The measures would help to ensure the continued existence of Fannie Mae and Freddie Mac, and would provide measures that would allow borrowers to refinance their mortgages with government-insured loans. It is expected that President Bush will sign this legislation, “despite his opposition to the inclusion of nearly $4 billion in grants for local governments to buy and refurbish foreclosed properties”, as the need to reestablish faith in the housing market is seen as such a high priority.
Only forty-five Republicans voted favor of this legislation, a fact which some see as a attempted separation from President Bush in an attempt to ensure their re-election in November. However, the House Republicans stated that this was nothing more than a vote against a measure that “puts taxpayer money at risk while potentially bailing out irresponsible borrowers and greedy lenders.”
Some describe these measures as a major step in the government’s attempt to reestablish a balance in the housing market, some ranking this move in the same league as the creation of the Home Owners’ Loan Corporation created as part of the New Deal for many of the same reasons. However, as is the case in most legislation, there are many who are not convinced that this legislation will have the desired affect.
It is still unsure as to whether the existing downward trend in the housing market will actually be affected by these measures, and many raise concerns about the government stepping in to save Fannie Mae and Freddie Mac when many had believed that the government would never spend taxpayer money for such a purpose. Other worries are raised in an Associated Press article; such worries include the fact that only first-time home buyers, whose income is under $75,000.00 ( $150,000.00 if married), who purchase a house between April 9, 2008 and July 1, 2009 will be able to take advantage of the tax breaks offered by the legislation. Even if they are able to take advantage of these tax breaks, such money will be paid back over a fifteen year span, albeit tax-free.
There seem to be a number of concerns that may cause these intended measures to fail. It appears as if the assistance provided to home buyers may be too narrowly tailored to help enough people, and/or it may be too late to turn around the housing market in the short time frame anticipated. Signs, unfortunately, point to failure for these measures, which causes even greater concern about the use of taxpayer money to bail out the two large mortgage companies; while it may be necessary to do so to steady mortgage interest rates, a slow to non-existent turn around in the housing market may require the government to expend more money than is economically appropriate or feasible.