Housing bill will help neither the homeowners nor the taxpayers
W hat Bush has tried to show as a blessing in his housing bill,
is, in reality, ‘a curse in disguise’. The bill has been cleared by the Senate, saying that it would rescue America’s cash-strapped home buyers and borrowers, but it would do more harm than good. The huge package that Bush signed into a law aims at safeguarding the nation’s two biggest mortgage companies, Fannie Mae and Freddie Mac. It also plans to save an estimated 1.5 million families from going on the streets. As per the new law, the Federal Treasury can save the two mortgage companies if and when they are about to collapse, by spending billions of dollars of taxpayers’ money, besides providing financial help to an estimated 400,000 troubled families by replacing their loans with subsidised government loans.
All these expensive plans would put an additional $800 billion burden on the already overburderned taxpayers. The amount of risk that they would be forced into would also be substantially higher than before, since the money would go to bankrupt companies and people.
Besides, the law would not help the housing sector much. “The housing sector will continue to post a correction as long as the inventory overhang continues to place downward pressure on prices. The housing market is largely functioning independent of the housing bill, and will come under downward seasonal pressure through Q4,” explains Michael R. Englund, Principal Directors and Chief Economist, Action Economics to B&E. Housing prices have already fallen by 15% and if market trends are anything to go by, they would further fall by another 10% or more thus bringing down the housing valuation further.
The double whammy has caught the homeowners on the wrong foot between rising mortgage payments and falling home values. Moreover, revival of the mortgage lending companies seems to be a distant dream. And as these illogical policy initiatives continue, the ultimate sufferers of this perilous situation will be the tax-payers & home owners.
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Source : IIPM Editorial, 2008
W hat Bush has tried to show as a blessing in his housing bill,
is, in reality, ‘a curse in disguise’. The bill has been cleared by the Senate, saying that it would rescue America’s cash-strapped home buyers and borrowers, but it would do more harm than good. The huge package that Bush signed into a law aims at safeguarding the nation’s two biggest mortgage companies, Fannie Mae and Freddie Mac. It also plans to save an estimated 1.5 million families from going on the streets. As per the new law, the Federal Treasury can save the two mortgage companies if and when they are about to collapse, by spending billions of dollars of taxpayers’ money, besides providing financial help to an estimated 400,000 troubled families by replacing their loans with subsidised government loans.All these expensive plans would put an additional $800 billion burden on the already overburderned taxpayers. The amount of risk that they would be forced into would also be substantially higher than before, since the money would go to bankrupt companies and people.
Besides, the law would not help the housing sector much. “The housing sector will continue to post a correction as long as the inventory overhang continues to place downward pressure on prices. The housing market is largely functioning independent of the housing bill, and will come under downward seasonal pressure through Q4,” explains Michael R. Englund, Principal Directors and Chief Economist, Action Economics to B&E. Housing prices have already fallen by 15% and if market trends are anything to go by, they would further fall by another 10% or more thus bringing down the housing valuation further.
The double whammy has caught the homeowners on the wrong foot between rising mortgage payments and falling home values. Moreover, revival of the mortgage lending companies seems to be a distant dream. And as these illogical policy initiatives continue, the ultimate sufferers of this perilous situation will be the tax-payers & home owners.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
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