Housing Bill and Rumors of a Second Stimulus Package
Attorney
(866) 735-1102 Ext 385
This Wednesday the House will vote on a housing bill that is expected to include a rescue for Fannie Mae and Freddie Mac.
Investors have been concerned about the financial health of both companies. Fannie and Freddie hold $5 trillion worth of mortgages and many congressional leaders feel that it is imperative to step in and prevent further financial distress to credit markets. Also, there is a lot of speculation, at least there has been over the last couple months and on this blog, that many more loans than originally thought are bad and that many more will continue to default over the next year (during the subsequent wave of interest rate resets).
Fannie Mae and Freddie Mac are private entities, but they were created by Congress to encourage homeownership by buying mortgages from banks (therefore, they're really Government Sponsored Entities or GSEs). Since the two hold or guarantee more than $5 trillion in home loans -- almost half of the nation's total -- Congress and now the White House feel that it is in the nation's best interest to step in and provide financial relief to both mortgage giants; it is also felt that this will allow both companies to continue issuing new mortgages.
Second Stimulus Package
"A Second Stimulus Package" is a story that media outlets will likely cover more over the next two months, as the first set of economic stimulus checks have done little to offset increasing gas and food prices. Below is an excerpt from an AP story that talks about Treasury Secretary Paulson's trepidations of guaranteeing a second round of stimulus checks:
Paulson acknowledged the U.S. is continuing to lose jobs, though he said the $168 billion economic relief plan approved this year has created jobs that would not otherwise exist. The plan included tax rebates for people and tax breaks for businesses.
Democratic leaders, including presidential candidate Barack Obama, are pushing for a second, smaller, economic installment. Paulson said he did not want to speculate about that idea.
"I'm focused on this stimulus package. It's made a difference in the second quarter. It's going to make a difference in the third quarter. We need to watch this very carefully," he said.