House Passes Neighborhood Stabilization Act

by Peter G. Miller
May 8th, 2008

The House today passed H.R. 5818, the Neighborhood Stabilization Act of 2008, by a vote of 239-188. This is one of two housing-related bills scheduled for a vote today.

The legislation, introduced by Rep. Maxine Waters (D-CA), will provide loans and grants to states and cities to deal with problems associated with large numbers of foreclosures in neighborhoods across the country. Essentially, the core idea of the legislation is to have local communities and investors buy up foreclosed homes, thus reducing the inventory of properties on the market and reducing downward pricing pressures.

The legislation must now be considered by the Senate and then signed by the President before becoming law. The President has said that he will veto such legislation.

In a statement yesterday, the White House said:

“The Administration is strongly committed to helping Americans stay in their homes. The President has taken swift action by launching the FHASecure initiative and facilitating the creation of the HOPE NOW Alliance. The Administration also continues to seek constructive solutions – such as legislation to modernize the Federal Housing Administration – to address the disruptions in the housing markets and help more Americans stay in their homes. Unfortunately, H.R. 5818, the Neighborhood Stabilization Act of 2008, would constitute a costly bailout for lenders and speculators and would delay the economic recovery it purports to advance. If H.R. 5818 were presented to the President, his senior advisors would recommend he veto the bill.

“H.R. 5818 would constitute a bailout by authorizing loans and grants to States for the redevelopment of abandoned and foreclosed homes. The principal beneficiaries of this type of plan would be private lenders – who are now the owners of the vacant or foreclosed properties – instead of struggling homeowners who are working hard to stay in their homes.

“The Administration is also concerned that H.R. 5818 would create an additional incentive for more lenders to foreclose rather than attempt a workout with distressed homeowners. An increase in foreclosures could well prolong the time it would take for the housing market to recover. This new program also would be slow to expend money, and thus its effects on the market would be delayed and spread out over time.”

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