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Pressure Builds In Washington

by Peter G. Miller
July 11th, 2008

The FHA bill has not cleared the Senate, but it could happen today, Friday.

July 4th was a week ago and here is today’s interesting thought:

Congress was not in session for a few days during the past week — as the old joke goes, the time when the Nation is safest….

Senators and representatives were home for a “state work period,” partying with the people, sharing concerns, kissing babies and doing the re-election dance.

The problem is that the dance floor is increasingly messy. More and more people are losing their homes despite claims of help from Hope Now and FHASecure. Whatever it is that has been done to date it plainly has not been enough.

So why is this important? FHA reform has been stuck in the Senate. You can bet that once the assembled lawmakers consider the views of increasingly de-housed constituents — and once they see how close we are to November — that the pressure to “do something” will be enormous.

The news yesterday regarding Fannie Mae & Freddie Mac should thrill no one. The New York Times on page one has a story this morning entitled US Considers Takeover of Two Mortgage Giants. One idea is for the U.S. government to guarantee $5 trillion in debt associated with the two giant companies. And yes, I do mean “trillion” with a “t”.

“The officials involved in the discussions,” says the Times, “stressed that no action by the administration was imminent, and that Fannie and Freddie are not considered to be in a crisis situation.”

Really? No crisis situation? Maybe that explains the huge drop in stock values for Fannie Mae and Freddie Mac during the past few days — and the increased insurance premiums they face.

No crisis for whom? Without an effective and efficient secondary market local lenders will be largely out of the lending business. Try selling homes when loan volume is reduced by 75 percent — or more.

Legislation that sounds good but does nothing is not acceptable. With home values and stocks on Wall Street dropping, there is a need for something more than symbolism. FHA reform, while hardly perfect, would be a great way to help lots of people. Watch for it to come to a town like yours. Despite delays, the die has been cast.

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This entry was posted on Friday, July 11th, 2008 at 2:30 am and is filed under . You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

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