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Will Recent Legislation Save the Housing Market?

Lindsey Sanchez, |Special to CNBC.com
Friday, 8 Aug 2008 | 3:28 PM ET

The housing bill, signed into law last week to help rescue failing home-financing companies, continues to stir up controversy. Will it be able to revive the housing market and relieve the credit crunch?

Friday Trade
The Friday buzz on the floor, with Steve Grasso, Stuart Frankel broker and Tim Smalls, Head of U.S. Trading Execution LLC

"At the end of the day, you will see somewhat of an increase in our fees, but we really are such an important source of refinancing help for people who are stuck in these subprime mortgages right now, but we want to make sure that if people want to stay in their home, and if they can afford to stay in their home with the right mortgage."

"There is a group of loans that we're getting from people whose down payment was financed by the seller. Those loans defaulted at a very high rate. Congress also banned that practice, which improves the quality of our portfolio significantly."

-Steve Preston, U.S. Housing & Urban Development Secretary

Mortgage Relief
Congressional leaders request mortgage companies to hold off on foreclosures until October 1st, when the new housing law goes into effect, with Mary Coffin, Wells Fargo Home Mortgage Servicing exec. vp and Steve Preston, U.S. Housing & Urban Development Secretary.

"We already know there are borrowers we are working with that cannot avoid foreclosure, even with this bill that has passed. This bill is not as sweeping that it will take everyone out of foreclosure."

"Some borrowers are just in personal situations that even the components of this bill will not assist them."

"We're all looking at all the different segments or tiers of customers and what we can uniquely apply against there situations to try and help them. So with that there is hope."

-Mary Coffin, Well's Fargo Vice President

Stiglitz on GSEs
Nobel-Prize-winning economist Joseph Stiglitz discusses the viability and future of Fannie and Freddie.

"What bothers me from the point of view of public policy is that Freddie Mac and Fannie Mae came to the American taxpayers, asked for the right to write a blank check and Congress gave them that right."

"What should have happened was corporate reorganization, keep the companies going but not protect the management, the shareholders, not even protect the creditors... The whole basis of a market economy is a system of accountability. You make decisions, you take risks, you get the upside, but you also take the downside."

"These guys that are supposed to be assessing and managing risks have repeatedly failed and I think that's what we really have to get our minds around. The fact that we had such confidence in these gurus of the financial markets... We turn to them about how to fix the system, but these are the guys that broke the system."

"The amount of potential liability that we undertook when we passed that bill with that blank check-- we just don't know. This is the worst kind of public irresponsibility."

-Joseph Stiglitz, Nobel Prize Winning Economist

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