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Bush signs massive housing bill

US Prez George W Bush signed a sweeping housing rescue plan designed to help 400,000 homeowners avert foreclosure and bolster ailing mortgage finance giants.

world Updated: Jul 30, 2008 19:32 IST

US President George W Bush on Wednesday signed a sweeping housing rescue plan designed to help 400,000 homeowners avert foreclosure and bolster ailing mortgage finance giants, the White House said.

Bush signed the broadest housing legislation in decades "to improve confidence and stability in markets, and to provide better oversight for (struggling US mortgage lenders) Fannie Mae and Freddie Mac," White House spokesman Tony Fratto said in a statement announcing the signing.

"The Federal Housing Administration (FHA) will begin to implement new policies intended to keep more deserving American families in their homes," Fratto added.

Treasury Secretary Henry Paulson and senior FHA leaders were at Bush's side during the low-key signing ceremony for the Housing and Economic Recovery Act of 2008, which legislators from both sides of the aisle have described as vital to stem fallout from a slumping housing sector.

It makes available 300 billion dollars in federal guarantees to help refinance troubled mortgages, and provides for government credit and equity injections in Fannie Mae and Freddie Mac, the two mortgage lenders that underpin much of the housing market, and calls for some 3.9 billion dollars to help local governments buy and rehabilitate foreclosed homes.

Opponents to the bill had argued that it would reward "irresponsible" lenders and consumers and allow the government too big a role in the housing market.

Bush, too, had opposed the bill because of the inclusion of the local government grants, but eventually dropped his opposition.

The bill's supporters stressed that providing a financial lifeline for the government-sponsored Fannie Mae and Freddie Mac as well as more regulatory oversight would contribute to confidence and stability in housing and financial markets.

The aid package comes with the housing sector still weakening from a nearly two-year-old slide and data showing home prices falling further, inventories rising and many buyers waiting on the sidelines.

Signs of continuing carnage in the sector came late Friday when the US Treasury took over two affiliated western banks, First Heritage Bank of Newport Beach, California, and First National Bank of Nevada, based in Reno, Nevada.

The Treasury's Office of the Comptroller of the Currency said both were undercapitalized and facing losses that would wipe out their capital.

The closure came just weeks after the failure of the much larger Indy Mac Bank, which was weakened by heavy exposure to risky subprime mortgages and collapsed after a run by depositors.

And on Tuesday the S&P Case-Shiller index, which tracks prices in 20 US markets, reported the steepest annual declines in the prices of existing homes in 10 large metropolitan areas since the survey began in 1987.

In the 10 areas, prices plunged 16.9 per cent in May compared to the same period a year earlier, while its index of 20 cities slumped 15.8 per cent.