In an editorial today, the editors of National Review Online do a good job in laying out the problems with the housing bills that passed last week:

Defying a White House veto threat, the U.S. House of Representatives passed a pair of housing bills Thursday that would reward foolish lenders and borrowers, weaken the reputation of American securities, and punish renters. Not bad for a day’s work.   The centerpiece of the first bill is a $300-billion mortgage-insurance fund that would allow the Federal Housing Administration to insure an estimated 500,000 troubled home loans, at a cost to taxpayers of $2.7 billion. Under this bill, lenders can get the FHA to insure a souring loan by agreeing to write down the loan’s value by as much as 15 percent. This works out well for those lenders who let their standards plummet as housing prices soared, as well as for borrowers who took out loans they couldn’t afford. It doesn’t work out so well for taxpayers who exercised better judgment.  


A separate housing bill passed Thursday would provide states with $15 billion in grants and loans to purchase foreclosed homes. The ostensible purpose of this bill is to allow states to prevent foreclosures from blighting neighborhoods and driving down property values. In reality, the bill is a massive subsidy to lenders who made bad loans and now find themselves struggling to find buyers willing to take foreclosed homes off their hands. What’s worse, the bill provides an incentive for lenders to foreclose on struggling borrowers rather than work out deals with them.

More here.