The Real Estate Agent Blog

By: Weichert, Realtors
For: Weichert WIRE “The newsletter for the Weichert Sales Team”
Dated: February 18, 2009

President Obama signed the American Recovery and Reinvestment Act into law Tuesday afternoon. The $787 billion plan is designed to stimulate consumer spending and create jobs, in order to help families recover and prosper.

Realizing that an economic recovery is contingent upon improvements in the housing market, the package includes provisions that will help attract first-time buyers, reduce inventory, stabilize home values and improve liquidity in the overall mortgage market.

The bill specifically helps real estate in the following ways:

– Increases the first-time homebuyer tax credit to $8,000 and eliminates the repayment requirement.
– Reinstates the 2008 higher loan limits for FHA, Fannie Mae and Freddie Mac.

Both provisions were championed by the National Association of Realtors (NAR), which estimates that the new version of the homebuyer tax credit could stimulate up to 300,000 additional home sales.

By Craig Miller
Published on: September 9, 2008

The Bush Administration is planning to take over housing finance companies Fannie Mae and Freddie Mac. Both companies do not have enough capital to continue housing loans according to the Bush Administration. The government will make investments (quarterly is proposed) according to the market conditions.

The government’s plan, created by Treasury Secretary Henry Paulson, would put the companies into a “conservatorship” status (similar to Chapter 11 bankruptcy). The Federal Housing Finance Agency would replace the chief executives, basically firing the two companies current executives.

Fannie and Freddie have funded 70% of the most recent home loans, therefore, being a major part to the recovery of the housing market. With low capital, Fannie and Freddie would need to decrease the amount of loans given to homebuyers, making mortgage rates increase drastically and delivering another hit to the already troubled housing market.

The more complex issue of wheter Fannie and Freddie will become either nationalized or privatized still remains a mystery. The government and financial experts have been debating those issues and some proposals coming from the debates would dramatically change the funding of home mortgages in the US. Paulson and government officials agreed that action had to be taken now before this more complex issue due to fear of Fannie and Freddie’s availability of cash needed for home loans. The take over is the beggining of Paulson’s plan which will leave the more complex and sensitive decisions to Congress and the next administration.

Good luck to the next administration, whether its McCain or Obama, it seems that they have much to repair, economically. We must hope that the next administration addresses this recession (not just debate about it) and does not pass it on to the next person in line, as the Bush Administration has done.