HOUSING BILL WONKERY.

The president has decided not to veto the Housing Bill that passed the House yesterday. So is it a good bill or not? Speaking to a few experts around town has led me to conclude it is an okay bill -- it will help allay the problems of the sub-prime mortgage crisis in the short term, but it doesn't offer long-term solutions to the problem of affordable housing or go as far as progressives might want it to go in the near term.

I'll leave an explanation of the details of the bill to David Abromowitz, a senior fellow at the Center for American Progress:

Given the mortgage meltdown and plunging housing market, this is basically a good bill. In particular, it puts $4 billion into communities hard hit by foreclosures for buying up vacant properties and getting them back into affordable ownership or rental, which is essential to keeping hundreds of neighborhoods from sinking towards long term blight. …[t]he bill also offers consumer-friendly fixed rate mortgage refinancing options, to replace the high cost mortgages often with springing interest rates, that are dragging millions of families towards foreclosure.

Still, this bill, while addressing the immediate crisis, does not address a bigger question: What will make an apartment or house more affordable to the vast middle tier of families, straining to pay for shelter? We have close to 100 million Americans living in housing where the families are paying more of their income than is affordable to keep a roof over their heads.

I also spoke with Barbara Sard at the Center for Budget and Policy Priorities, who noted some problems with the bill. First off, only about 400,000 households will be able to refinance their mortgages under the legislation, out of 2.2 million expected foreclosures next year (though 20 to 40 percent of those are rentals which aren’t targeted by the legislation). Sard noted that the refinancing portion of the legislation is not a corporate giveaway: lenders can't access government subsidies unless they refinance mortgages at current, lower rates, eating some of the loss. But there's no guarantee that they'll do this because House Dems were unable to insert coercive measures to enforce refinancing at current rates. At this point, it's hard to say whether the bill will halt enough foreclosures to have a significant economic effect.

Our own Dean Baker strongly dislikes this bill because of the Fannie Mae/Freddie Mac stockholder bailout, among other reasons. But we’re still not sure how likely it is that the government will need to bail out F&F -- the CBO puts the chances at even, and their stock prices rose yesterday.

But most on the left are disappointed because Democrats didn't get more out of the bill in exchange for the bailout. There are too few restrictions attached to the various corporate bailout and refinancing portions of the bill, and the affordable housing fund isn’t as large as it could be -- Maxine Waters originally proposed $15 billion which was bargained down to $4 billion. But the price of holding out for a better bill against a potential veto even as foreclosures continue might not have been worth the final result. A key problem is that the public good of homeownership is tied up in a lot of private interests, which makes it difficult to use policy tools to help one without helping the other. It would have been smarter to simply keep F&F as federal entities that were entirely dedicated to homeownership. But, as Abromowitz wrote me, “longer term we need to sort out the right balance of public benefit and private gain, but right now the stability in the market is the overriding goal.”

--Tim Fernholz

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