We can say that our new President Barack Obama has a fine economic mess on his hands, and we look to him to guide us out of it. Does he have a plan or not? Well, he does and how. The proposed stimulus package is detailed and very in-depth, and there are winners and losers. The good news is the Housing Industry is a Winner! The President discussed the plan on his weekly address.
I recently attended IAR's (Illinois Association of REALTORS) Public Policy Meetings in Bloomington, IL, and the stimulus plan and pending legislation were the topics of discussion.
President Barack Obama's proposed stimulus package has many facets. One, the AMERICAN RECOVERY AND REINVESTMENT BILL of 2009, addresses eight specific points. Some are clean and efficient energy; infrastructure, roads, bridges, transit and waterways; and tax cuts, to make work pay and create jobs.
So where does housing come in? Well the sub-heading for this portion of the bill says it all: Attacking the Housing Crisis. There is a proposed $13.6 billion in this section,and it addresses foreclosures. The NSP (Neighborhood Stabilization Program) allows non-for-profits and private sector individuals (with the capacity to do so) to purchase and rehabilitate foreclosed and vacant properties in order to produce more affordable housing and reduce blight. On January 15, 2009 Mayor Richard J. Daley had a press conference detailing the program.
Then there is HR525 which was in mark-up on Thursday, January 22, 2009. Congressman Charles Rangel of New York introduced the elimination of the repayment of the $7,500 First-Time HomebuyerTax Credit, and at last update, Congressman Lewis of Georgia has added extending the tax credit from June 30, 2009, to December 30, 2009. Read the attached letter from NAR (National Association of REALTORS) outlining these points.
Then there is HR384; it’s all about TARP (Troubled Assets Relief Program), or as Greg St. Aubin Director of Government Affairs for IAR (Illinois Association of REALTORS)likes to refer to it, "TRAP." I’m sure we all have our own four-letter word for this program. The bill tightens guidelines by increasing the reporting requirements along with other new conditions. This bill also has a foreclosure provision; at least $40 billion and no more than $100 billion be devoted to residential foreclosure mitigation. Also included is a homebuyer stimulus program.
With focus on housing as the underpinning to recovery, what remains to be seen is how lending guidelines will be affected, and what changes will support President Obama’s plans for the Stimulus Package. There is focus on lending in the afore-mentioned bills. Question is, are the banks going to act? The banks were suppose to lend when the initial $350 billion was injected into the system; that didn’t happen. What did happen was an elaborate dance of changing guidelines on a daily basis. I feel confident considering HR 384 has written in the Home Buyer Stimulus Program that the Secretary of the Treasury can purchase mortgages and mortgage-backed securities.
The banks could decide to go the Credit Suisse way, as reported in The Wall Street Journal and Reuters. The Credit Suisse way was, instead of cash bonuses to senior management, to gave out the bad paper/mortgage-backed securities as Christmas Bonuses. Quite brilliant! The balance sheets no longer have these bad assets; and these senior managers have the equivalent of coal in their stockings. I believe there could be copycats.
The other nice thing about some of the language: accountability is written into it. It is thoughtful and mindful of the people’s interests.
BTW, The losers are those companies that have already received TARP Money (Troubled Asset Relief Program). We know who they are. The cost of the Recovery and Reinvestment Bill is $825 billion, equal to 3% of GDP over the next two years, and $125 billon larger than the bailout bill.
What results or impact will happen when these bills pass? Or will they pass?
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