Many members of Congress, not to mention those of us living on Main Street, are disappointed in the management-to-date of the funds earmarked for the Troubled Asset Relief Program. The 700 billion dollar bailout– now commonly known as TARP — has already had the first half of the funds committed, primarily to injections of capital into troubled banks and lending institutions.

President-elect Barack Obama has asked President George W. Bush to seek release by Congress of the TARP’s next $350 billion, and there is increased pressure in Washington to allocate a portion of these funds to continue stabilization efforts for the struggling mortgage and real estate market. The President-Elect has not yet been forthcoming on details, but has indicated that within several months he would unveil “a sweeping effort to address the foreclosure crisis so that we can keep responsible families in their homes.”

Although there are no firm plans in place, speculation is that some of the following ideas are currently on the table:

Expanded Home Buyer Tax Breaks. At the current time, only first-time home buyers are eligible for a temporary tax credit of $7500, and the program is slated to end in July 2009. The National Association of Realtors and the National Association of Home Builders are both lobbying hard to expand this tax credit in a number of ways, including modifying eligibility to include all homeowners, and making it a true tax credit, among other beneficial changes. According to Senate Finance Committee member Charles Shumer, there is “broad support” among fellow members to make tax policy changes to support housing– but actions will speak louder than words in the endgame.

Further Interest Rate Reductions. By buying up billions in mortgage-backed securities backed by Fannie Mae and Freddie Mac, the Federal Reserve has already been effective in lowering rates on 30-year fixed mortgages to record lows. House Financial Services Chairman Barney Frank has suggested if TARP funds are to be used for housing reform, the Treasury must commit to using funds to “stimulate demand for home purchases, including through ensuring the availability of affordable mortgage rates for qualified home buyers”.

Bankruptcy Law Reforms. The lending industry, as well as other housing industry-related interests, have lowered their resistance to a proposal regarding bankruptcy “cram downs”– a process which would allow bankruptcy judges to write down the primary mortgages of homeowners filing for bankruptcy. Citigroup has recently announced that it would support this proposal contingent on the condition that it should apply only to existing mortgages, and that homeowners filing for bankruptcy provide at least ten days notice thereby giving them the opportunity to modify the mortgage.

TARP Funds for Homeowners. In a bill being proposed by House Financial Services Chairman Barney Frank, he is requesting 40 to 50 billion of the TARP funds be earmarked for foreclosure mitigation, which he hopes to have implemented by April 1, 2009. Plan details TBD, but rumor is that the thus-far ineffective “Hope for Homeowners” program will be revamped to provide more efficient methods for cost reductions and write down requirements.

There will no doubt be many more new proposed plans put forth in order to help stabilize the U.S. economy in 2009– Does anyone have some ideas they’d like to propose???

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