Sunday, July 27, 2008

Congress sends mortgage bailout to President Bush; 400,000 homeowners may be helped directly; "moral hazard" played down

Congress has passed a “mortgage bailout” and sent it to President Bush. Typical media coverage comes from Sean Lendell of The Washington Times, Sunday July 27, “Bill called ‘an infusion of confidence’ for markets,” link here.

The bill passed the Senate 72-13 (Saturday) and appropriates $300 billion to guarantee loans for certain homeowners, up to a cap of $625000. An estimated 400000 homeowners will be helped in staying in their homes, probably most of them having dependent children or elderly.

Christopher Dodd (D-CT) spoke on CNN of the frustration stable homeowners have over the “moral hazard” issue of other “less prudent” homeowners being bailed out. He pointed out, however, the all homeowners have self-interest in preventing foreclosures in their immediate neighborhoods, which will drop property values by 1% immediately or more, and increase neighborhood crime.

The most relevant govtrack reference appears to be HR 3221 “Foreclosure Prevention Act of 2008”, originally introduced by Nancy Pelosi. The link is here and provides considerable detail as to the passage through Congress.

Picture: Outside Freddie Mac in Vienna, VA (no place to stop)

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