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A look at the new housing bill

President Bush signed legislation Wednesday aimed at shoring up the housing market, providing an emergency safety net for mortgage giants Fannie Mae and Freddie Mac, and helping several hundred thousand families avoid foreclosure.

Bush signed the bill with neither fanfare nor a signing ceremony, affixing his signature to the measure he once threatened to veto, in the Oval Office in the early-morning hours.

He was surrounded by top administration officials, including Treasury Secretary Henry Paulson and Housing Secretary Steve Preston.

The measure, regarded as the most significant housing legislation in decades, lets homeowners who cannot afford their payments refinance into more affordable government-backed loans rather than losing their homes.

Here's how the housing bill affects homeowners:

Tax deductions and credits

All homeowners who do not itemize their income taxes can deduct between $500 and $1,000 from their 2008 federal taxes. Anyone buying a first home between April 9, 2008, and July 1, 2009, will receive up to $7,500 in federal income tax credits. The bill includes an estimated $15 billion in housing tax breaks.

Conversion to 30-year loan

Homeowners struggling to make payments on high-interest mortgages can contact their banks and transform their loans into government-backed, 30-year fixed-rate mortgages.

To qualify, homeowners must have a mortgage debt-to-income ratio greater than 31 percent. To see if you qualify: Multiply your gross monthly salary by 31 percent. A homeowner earning $75,000 a year, for example, must owe a monthly mortgage payment of at least $1,938.

The new loan cannot exceed 90 percent of the home's value and borrowers must prove they can repay the loan.

Congressional budget analysts project that this $300 billion program would help 400,000 homeowners facing possible foreclosure.

The program begins in October, but officials recommend homeowners begin the process now.

Buy and fix foreclosures

Homeowners living in neighborhoods stricken by foreclosures, where vacant properties were left run down with overgrown yards, may see improvements. The bill provides $3.9 billion in grants for governments in the hardest-hit communities to buy and fix up already-foreclosed property at a discount.

Low-interest assistance

First-time buyers or homeowners with subprime mortgages in some states can qualify for low-interest loans or refinancing under a provision allowing states to offer an additional $11 billion in tax-free municipal bonds to pay for such housing projects. The actual dollar amount and the criteria for who might qualify will vary by state.

Counseling, legal services

Homeowners strapped for cash will be able to receive preforeclosure financial counseling and legal services. The bill allocated $180 million for these services.

Affordable rental housing

A new fund, paid for with profits from the mortgage companies Fannie Mae and Freddie Mac, will help build affordable rental housing.

The two companies will be allowed to buy pricier mortgages, up to $625,000, which would make stable loans available to buyers in expensive cities.

Also, Fannie Mae and Freddie Mac will be subjected to greater government oversight. Regulators will have authority to approve pay packages for company executives.

Associated Press and
MarketWatch.
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