President Bush on Wednesday signed into law a huge package of housing legislation that includes a plan to help hundreds of thousands of troubled borrowers avoid losing their homes and broad authority for the Treasury Department to safeguard the nation's two largest mortgage finance companies.
The wide-ranging law could have a big impact on homebuyers, lenders and investment banks.
The measure includes $300 billion in new loan authority for the government to back cheaper mortgages for troubled homeowners and $3.9 billion for communities to fix up foreclosed properties causing blight in neighborhoods. It also provides a first-time homebuyer tax credit, something akin to an interest-free loan of up to $7,500 for 15 years. For some, that could be just enough to make the difference between qualified and not.
The bill's biggest impact, though, could be on troubled housing-finance giants Fannie Mae and Freddie Mac. It authorizes the Treasury to rescue the companies should they verge on collapse, potentially by spending tens of billions in federal money. Together, the companies own or guarantee nearly half of the nation's $12trillion in mortgages.