Next week the President is likely to sign into law the most far-reaching housing bill any of us have seen in at least a generation. Now that the details seem to have been worked out, it's time to talk about what this means.

First, you should know that almost no one really likes this bill. But even those who don't will generally admit they think it's a necessary evil.

Strangely enough the piece of the bill likely to have the biggest long term impact is the last minute addition thrown in to address what's happened at Fannie Mae and Freddie Mac. In the short term, this is a good thing. If you think the local real estate market is tough now, a Fannie Mae/Freddie Mac collapse would have put us into a tailspin with very dire broad economic consequences. In the long term, this is probably not a good thing. It's a band-aid and doesn't ensure there's any reason for either of these institutions to behave more responsibly in the future. And, there's certainly no sign anyone will be held accountable!

The pieces of this bill that are designed to immediately impact the housing market seem unlikely, in my mind to have much real impact.

The first piece I'll focus on is the provision that is supposed to encourage lenders to renegotiate mortgages for troubled homeowners. So, let's say you bought one of those new homes in Culpeper a couple of years ago. You paid $400,000 (with 100% financing) and now the thing is worth $200,000. This bill suggests that the bank provide you a new mortgage at 90% of the current value of the home. In this case, it would be $180,000. The rest of the debt would be forgiven. The bank has just eaten a $220,000 loss. In addition, they will pay an additional 3% fee to FHA which will then guarantee the mortgage.

The supposed payoff for the lender is twofold. First of all, they don't end up with a foreclosed home on their hands. Foreclosed homes are a money drain for any institution. They're expensive to maintain and the cost of selling them is something banks hate. The other payoff for the lender is that the mortgage is now guaranteed and they know they won't lose their shirt on what's left.

Since this program is entirely voluntary, is that enough incentive given the size of some of these losses? Obviously, I don't know. But I wonder if we'll see the most impact on those communities that weren't that badly hit, where the losses that the banks eat will be smaller. If your a bank, maybe this program makes sense where the original home price was $400K and the current value is $370K. So, help may go to those places that need it least!

The other piece I'll talk about today is the $8000 7500 credit for the first time home buyers who buy foreclosed homes any primary residence. Overall, this is a good thing. It's certainly a nice bonus if you're a first time home buyer! And, we certainly need to move those foreclosed homes out of inventory faster.

But if you're Joe Seller, trying to sell your home and the home next door is a foreclosure, buyers have an awfully big incentive to buy that home rather than yours.

If you've got opinions on these parts of this bill, or on other provisions, chime in. Is this, on balance, good or bad? Will it do any good for our local markets?