Guidant Financial Group Blog

Bush signed the housing bill today (see Bush Signs Sweeping Housing Bill). Good!

But the Treasury Office estimates that about 35 percent of the loans that the new bill will help to refinance will still end up in trouble. Bad!

The new bill encompasses several initiatives aimed at bailing out the housing market. The first is help for those homeowners facing foreclosure. The bill will create government-insured loans with more affordable rates.

The second initiative is the bail-out for our friends Freddie and Fannie. As outlined in our post on 07.22.08, the government will extend a large line of credit to the two mortgage giants in hopes of heading off the collapse of the companies, which own half of the U.S.’s mortgages.

The last major initiative in the bill includes money for local governments to purchase and refurbish foreclosed properties.

There is a lot of debate as to whether this housing bill will serve the purpose for which it was created: keeping Americans in their homes. Many experts have declared this the largest housing intervention since the New Deal. The creation of the FHA and Fannie Mae as a part of the New Deal, however, was a result of outside influences – whereas the bill that was signed today was the result of the lenders’ own mismanagement.

What a lot of people are wondering now is: Why are 35 percent of homeowners still going to lose their homes, when the private shareholders of Fannie Mae and Freddie Mac stand to profit from the government bailout?

Any thoughts?