Housing Relief Bill Could Help 500,000

Headlines on CNNmoney.com but we will see since this is going to really happen the earliest date of October, 2008.

Housing relief: Help, but for how many?
Sponsors of the Senate's bipartisan mortgage bill say it will help 500,000 people. But an Oct. 1 start date means many homeowners could be out of luck.

By Jeanne Sahadi, CNNMoney.com senior writer
May 23, 2008: 10:39 AM EDT

NEW YORK (CNNMoney.com) -- When the Senate Banking Committee passed a housing bill intended to limit foreclosures, panel Chairman Christopher Dodd, D-Conn., said he expected the measure could help 500,000 borrowers stay in their homes.

While the bill could help a lot of people, it's unlikely to help 500,000.

The bill's key provision would allow the Federal Housing Administration (FHA) to insure up to $300 billion in new loans for at-risk borrowers if lenders agree to write down loan balances below the appraised value of borrowers' homes.

The Congressional Budget Office has not yet released its official estimates of the bill's FHA proposal.

But in analyzing the potential costs and reach of a similar proposal passed by the House in May, the CBO estimated that 500,000 borrowers may enter the program - and that 35% of them could still default. So the best estimate of the net number of borrowers who will stay in their homes under the program is 325,000.

That would reduce anticipated foreclosure filings by 8% over the next few years, according to an estimate from Goldman Sachs analyst Alec Phillips.

That's not the only factor that could reduce the number of homeowners helped by the Senate bill. In making its estimates, the CBO assumed a June 1 start date for the FHA program. But the Senate version of the legislation - considered more politically viable than the House bill - would start the program on Oct. 1.

That four-month difference is likely to flush from consideration a segment of the bill's immediate target group: the 1.5 million subprime borrowers with adjustable-rate mortgages (ARM) whose loans are scheduled to reset in 2008.

http://money.cnn.com/2008/05/23/news/economy/senate_housing_bill_effect/index.htm?postversion=2008052310