The 10 Most Controversial Provisions of the Housing Bill

27 July 2008

by Donny Shaw

Congress has officially cleaned its hands of the landmark American Housing Rescue and Foreclosure Prevention Act and sent it to President Bush for his signature. The bill is about 694 pages long, but you don’t need to read any of it to find out about the parts you’ll probably hate the most. Here are my picks for the bill’s ten most controversial and suspect provisions:

1. Fannie and Freddie Bailout – The bill gives broad new authority to the Treasury Department to spend a limitless amount of taxpayer money in order to safeguard government-sponsored enterprises Fanie Mae and Freddie Mac. The bailout’s Estimated to cost $25 billion in over the next two years, but there’s no way to predict the future and estimates on this are really just wild guesses. Peter Orszag, Congressional Budget Office director, admits the actual cost is uncertain and could be as much as $100 billion.

2. Mortgage Bailout – The Federal Housing Administration will have new authority to buy up to $300 billion in at-risk mortgages and refinance them at more affordable, fixed rate mortgages. The potential problem here is that homeowners that use the program could then default on their new government-backed mortgages, which would put taxpayers on the hook. The Congressional Budget Office predicts the total cost to the government for this program to be about $2.7 billion, but again, this is a wild guess and it could easily end up costing a lot more.

3. Fannie and Freddie Lobbying – Okay, this isn’t something in the bill; it’s something that isnt’t in it, but probably should be. Even though Fannie Mae and Freddie Mac will be taking in huge amounts of taxpayer money, they won’t be banned from lobbying and other political activities. In a press release, Sen. Jim DeMint (R-SC) said, “Currently, the Department of Treasury cannot retain high-powered lobbyists or make political contributions to candidates, and the same rules should apply to Fannie and Freddie. If we plan to use taxpayer dollars to buy shares of these troubled companies, they should be treated like other federal entities. Any legislation exposing taxpayers to this risk should include a serious debate on long-term reforms, and a ban on lobbying must be included.”

4. Federal Fingerprint Database – Besides dishing out the bucks, the bill contains a provision that will bring in private information about citizens. The bill establishes a national registry of personal data, including fingerprints, on everybody deemed to be a “loan originators.” According to CNet, a loan originator is anyone who “accepts a residential mortgage application, negotiates terms on a mortgage, advises on loan terms, prepares loan packages, or collects information on behalf of the consumer. Real estate agents are covered if they get “compensation” of any sort (including kickbacks) from loan originators.” The stated reason for the new database is to verify the credentials of brokers and lenders, but there are no limits on how the government can use the information.

5. Neighborhood Stabilization – This is the part of the bill that prompted President Bush’s initial veto threat. The bill sets aside $3.92 billion to be used by HUD’s Community Development Block Grant (CDBG) program to buy up and rehab foreclosed homes. The money will be distributed throughout the states to be used according to local needs. In a statement of administration policy, the White House wrote, “The Administration believes the principal beneficiaries of this type of plan would be private lenders – who are now the owners of the vacant or foreclosed properties — instead of struggling homeowners who are working hard to stay in their homes,”

6. Credit Card Tracking – Here’s another provision that will collect a huge amount of private information for the government. Deep inside the bill is a program requiring banks to to track, aggregate, and report information on all credit and debit card transactions to the IRS. FreedomWorks Chairman Dick Armey had this to say about it: “This is a provision with astonishing reach, and it was slipped into the bill just this week. Not only does it affect nearly every credit card transaction in America, such as Visa, MasterCard, Discover, and American Express, but the bill specifically targets payment systems like eBay’s PayPal, Amazon, and Google Checkout that are used by many small online businesses. The privacy implications for America’s small businesses are breathtaking.”

7. Section 8 – This one’s not really controversial, but maybe just because we don’t know what’s going on with it. Randomly, one section of the bill extends Section 8 federal housing subsidies for “the property known as The Heritage Apartments” in Malden, Massachusetts. Someone should ask Edward Markey (D-MA), Malden’s congressman, about what strings he had to pull to get this one in there.

8. Tax Cut for Chrylser – Another weird one. According to the New York Times, there is a provision in the bill “tailored narrowly for Chrysler to ensure that it can benefit from a corporate tax incentive even though the company is now structured as a partnership not a corporation. The bill does not name Chrysler but rather describes an unnamed automobile manufacturer “that will produce in excess of 675,000 automobiles” from Jan. 1 to June 30, 2008.”

9. Raising the Debt Ceiling – Going right to the central question of how much the government is willing to spend on bailing out the mortgage industry is a provision to increase the national debt ceiling by $800 billion. As Jim Quinn wrote on Nolan Chart, “this is like giving a spendaholic an increase on their Amex credit line. Give Congress the ability to spend $10.8 trillion and they will.”

10. Foreclosure Counseling – It’s “only” $150 million, but it’s for exactly the kind of thing Conservatives hate. The money will be distributed by the public/private Neighborhood Reinvestment Corporation to program to organizations throughout the country to provide counseling to struggling homeowners.

For more general information about the housing bill, see the Associated Press’ overview and all the news and blog coverage we’re aggregating at OpenCongress.