More about Santa Cruz and the 2008 Housing Bill

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I got quite a few e-mails from my post the other day about the Housing and Economic Recovery Act of 2008. My mother wrote me (Hi Mama!) and said, what’s a GSE? What’s FHA? Good questions. Here’s a bit of a run-down on some of the acronyms used in my last post:

  • A GSE is a Government Sponsored Enterprise – in this case, Fannie Mae and Freddie Mac, but there are and have been a few others. As I often do, I will refer you to the Wikipedia entry for Government Sponsored Enterprise.
  • FHA is the Federal Housing Administration. You can read all about it on the Wikipedia page about the Federal Housing Administration. It’s no surprise that a major piece of the legislation that President Bush just signed addresses the FHA – together with Fannie Mae and Freddie Mac, these institutions are pretty much the only things holding the real estate market together at the moment.
  • VA is the Veteran’s Administration. It used to be that we didn’t have too many VA loans in the area, but now prices have dropped in many parts of Santa Cruz and north Monterey County that VA loans are becoming increasingly more frequent.
  • CDBG: that’s Community Development Block Grant.

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I got an e-mail from another client asking if this would put an end to short sales and REOs. The answer to that one is a resounding no. Here’s a link to an interesting take on the housing bill:

[From After the Housing Bill: Time to Address Foreclosures | Corporate Accountability and WorkPlace | AlterNet]

The housing bill will likely help less than five percent of the families facing foreclosure over the next two years.

Of course, AlterNet is a commie-pinko agitator web site, so take that with a grain of salt. Don’t get me wrong – I love commie-pinko agitators as much as the next guy, but you can see from the article that the author very much favors competing legislation, H.R. 6116, the Saving Family Homes Act of 2008. Good or bad, I can predict this with a lot of confidence: HR 6116 will go nowhere.

I found another interesting article about this bill, claiming that the 2008 Housing Bill is just Crony Capitalism at its finest. This is actually a really great article, and if you are interested in the legislation just passed, I recommend you read it. Among the many questions it raises is, what is the “fair market value” of a home? I mean, the idea is that the debt gets written down to 85% or 90% of the home’s current value – how is that home’s value determined? By an appraiser, probably – but which appraiser? The bank’s? The borrower’s? I’m guessing the bank will be choosing the appraiser, and what do you want to bet the appraiser will be turning in rosy figures for the home’s value?

One of the biggest questions out there is, say you are a homeowner with a mortgage you can’t afford – how do you take advantage of this bill? Suppose you do somehow manage to qualify for the program, that you are one of the lucky 5%. Who do you call? My guess would be the lender’s loss mitigation department. And, good luck with that – they’re famously painful to deal with. It’s a messy situation still, and it appears that the Housing and Economic Recovery Act of 2008 will not be as helpful as we’d hoped to struggling homeowners in Santa Cruz county.

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