Foreclosures Help

Posted on October 27th, 2008 by saman

The USA Congress has approved a law through which the state offers financing to giant companies in the area of real estate mortgage, Fannie Mae and Freddie Mac and they provide a fund of 300 billion dollars in order to help hundreds of thousands of homeowners affected by the foreclosure crisis.

The law, approved in the Senate with 72 votes for and 13 against, has as well been approved by the Representatives Chamber and it only needs the signature of the president George W. Bush. The number of people who are not able to pay their mortgages and face foreclosure has reached a record level in the USA and together with the decrease of the properties’ prices it has led to the greatest crisis of the real estate area in the USA since the Great Economic Crisis.

Fannie Mae and Freddie Mac have recorded losses of more billion dollars because of loans and both companies’ actions’ have recorded important losses. Experts in the real estate area have declared that the law will contribute to a settling of the sector, but it cannot stop the foreclosure crisis. Approximately 2.5 million homeowners will lose their properties this year because of their inability to cover loans, according to estimations of the national coalition of reinvestment communities, an organization made up of 600 investment communities and development groups.

The law of the Congress is welcomed but it will probably have little effect upon the crisis in the foreclosures area, which is still affecting financial markets and economy, according to real estate experts. On the background of withdrawing private funds from the mortgage sector, Fannie Mae and Freddie Mac own or guarantee now about half of the American mortgages, which is worth 12 trillion dollars. According to the law, these two financial companies can access temporary credit lines and the government can even purchase actions if the market evolution requires it.

The Congress has as well decided to provide a fund of 300 billion dollars, under the control of the federal administration for properties, in order to support the population to revamp credits that cannot be covered anymore. Approximately 400,000 families could benefit from the fund that can become operational on the 1 October.

The normative act foresees to offer four billion dollars to communities in order to help them purchase and mend foreclosed homes that are going to be sold at auctions. It can contribute to decrease of some taxes related to a property purchase, it is going to set up the first office for licensing mortgage brokers and credit officers, and it increases the foreclosure limit as far as the credit guaranteed by federal agencies is concerned.

The new law also needs an authority to regulate joint stock companies, with larger competences than existent ones, including the influence upon the capital level and internal financial controls, which will cooperate with the Federal Reserve.

Overall, with its advantages and disadvantages, this law is one of the first actions against foreclosures spreading and it does deserve to be appreciated by people.