By Eugene T. Lowe
July 28, 2008

As U.S.MAYOR went to press, the Senate was to consider final passage of Housing legislation Sauturday, July 26.

By a vote of 272 to 152, the U. S. House of Representatives on July 23 passed the Housing and Economic Recovery Act of 2008. The measure will now go to the Senate where it is expected to be passed and sent to President Bush to be signed into law. Most notable to cities is the $3.9 billion CDBG neighborhood stabilization assistance that will allow communities to buy foreclosed homes at a discount and rehabilitate them for resell in order to stabilize neighborhoods. The legislation also creates a permanent affordable housing trust fund that would provide money for the construction, maintenance and preservation of affordable rental housing for low and very low-income individuals and families.

The White House had threatened that the President would veto the bill because of the $3.9 billion CDBG program, contending that it was a bailout for banks, but White House opposition was withdrawn before House debate began on the bill. In the end, there was too much in the bill that the White House wanted such as the modernization of the Federal Housing Administration (FHA) and shoring up Fannie Mae and Freddie Mac by increasing an existing Treasury line of credit to both of the government sponsored enterprises (GSEs). The White House also supported the creation of a strong independent regulator for Fannie and Freddie authorized in the bill. And to get all that it wanted, the White House in the end had no other alternative but to accept the $3.9 billion CDBG program. Hours before the House voted on the bill, the White House released its statement of policy on the bill that said, “The Administration supports passage of H.R. 3221.”

In addition to the modernization of FHA, backstopping the GSEs Fannie Mae and Freddie Mac, establishing a strong regulator for Fannie and Freddie, providing $3.9 billion for CDBG neighborhood stabilization assistance, and creating a permanent affordable housing trust fund, H.R. 3221 also provides $300 billion in FHA loan guarantees that will keep 400,000 families from losing their homes through foreclosure, establishes standards for preventing future abuses and crises, helps soldiers through the Veterans Administration to avoid foreclosure, and through tax provisions expands refinancing opportunities and home buying. For example, one such tax provision would temporarily increase the low-income housing tax credit. The bill also increases the debt limit to $10.6 trillion. The national debt is currently $9.5 trillion.

The $3.9 billion CDBG emergency assistance would be distributed by a HUD developed formula to communities hardest hit by the foreclosure and subprime crisis. The foreclosed and rehabilitated homes would be sold or rented to moderate-income individuals and families (incomes cannot exceed 120 percent of the area median income). At least 25 percent of the funds will have to be targeted to house low-income persons and families with incomes not exceeding 50 percent of the area median income. The bill also provides $180 million for pre-foreclosure counseling.