By ALAN ZIBEL
The Associated Press
Thursday, February 25, 2010; 3:48 PM

WASHINGTON — Lawmakers are taking aim at the Obama administration’s struggling mortgage assistance program, with Republicans calling it a worthless exercise and Democrats saying it doesn’t go far enough.

In a report Thursday, Reps. Darrell Issa, R-Calif. and Jim Jordan, R-Ohio., called the program a misuse of taxpayer money. Though $75 billion has been set aside for the program, so far only $15 million has been spent.

They also said it distorts the housing market by keeping people in their homes who would be better renting.

“Many Americans are throwing their money into homes that they believed the government would help them keep, only to find out thousands of dollars later that they will face foreclosure anyway,” Jordan said at a House hearing.

Obama administration officials, however, say the program gives a second chance to homeowners who were given shoddy loans during the housing boom. And they defend their track record, even though only 116,000 homeowners have completed the process out of the 1 million enrolled since the program’s launch last March.

While “challenges remain”, the program “is helping homeowners who have faced real financial hardship,” said Phyllis Caldwell, chief of the Treasury Department’s homeownership preservation office.

Democrats, however, argued that the Treasury Department needs to put more pressure on the lending industry to reduce borrowers’ outstanding principal balances

The program is designed to lower borrowers’ monthly payments by reducing mortgage rates to as low as 2 percent for five years and extending loan terms to as long as 40 years. To complete the process, homeowners need to make three payments and provide proof of their income, plus a letter documenting their financial hardship.

But experts warn that hundreds of thousands of borrowers will not complete the process because they are found to be ineligible during an initial trial phase. Housing counselors complain that many homeowners remain stuck in limbo without final word on their applications

Treasury officials acknowledge that the treatment of borrowers under the program has been a problem. They have been working on new consumer protections such as giving those rejected from the program 30 days to appeal the decision and barring lenders from lenders continuing with foreclosures while homeowners were being evaluated for help.

Last week, President Barack Obama announced that housing agencies in Arizona, California, Florida, Michigan and Nevada will receive $1.5 billion in financial rescue money. The funds will go to local programs to help unemployed homeowners, “under water” borrowers who owe more than their home is worth, or pay lenders to assist borrowers with second mortgages.

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The decimated housing market may get considerably worse before it gets better, according to housing-industry professionals, who expect foreclosures and home-price declines to continue pressuring the sector through at least the first half of 2010.

The biggest problem will likely be a flood of inventory hitting the market from rising foreclosures, says Bob Curran, a managing director at Fitch Ratings. With a mountain of specialized adjustable-rate mortgages, known as option ARMs and Alt-A mortgages, slated to reset over the next 12 to 18 months and unemployment projected to hit 10.5% this year, the number of homeowners defaulting on their mortgages is expected to surge. At least $64 billion in option ARMs will reset in 2010 and another $68 billion in 2011, according to First American CoreLogic, a real estate and mortgage-data company. 

At the same time, the government’s loan-modification program has been disappointing: the default rate on loans modified after the third quarter of 2008 was 61%, according to a report issued in December by the Office of the Comptroller of the Currency and the Office of Thrift Supervision. All of this is expected to trigger another wave of potential home foreclosures in 2010 and could cause home prices to fall another 5% to 10% before the market stabilizes, according to analysts and economists.

A record 3 million homes received foreclosure notices in 2009, according to Lawrence Yun, chief economist with the National Association of Realtors (NAR). He expects a similar number this year.

John Burns, president of John Burns Real Estate Consulting, is a bit more bearish, predicting foreclosure notices will rise to 3.1 million this year. Foreclosure notices include default notices, auction-sale letters and bank-repossession notices. But those notices may produce a far more damaging result than last year’s. “I think 50% more people will lose their homes to a bank this year than they did last year,” predicts Burns. 

One reason for the expected jump, he says, is that in 2009 many lenders were under pressure from the Obama Administration to postpone repossessions until loan modifications could be made. However, many banks didn’t have the staff to assess all their defaulted loans at the time, and he believes many of those will ultimately go into foreclosure in 2010.

Adding to the sector’s woes — the Federal Reserve has indicated it plans to end a program that’s helped keep mortgage rates at attractive levels for home buyers. The Fed program, which involved purchasing up to $1.25 trillion in mortgage-backed securities backed by Fannie and Freddie, will expire on March 31. Rates have already started to inch up in anticipation of the change, with the average 30-year fixed-rate mortgage surpassing the 5% mark in December.

Since the housing market’s peak in July 2006, home prices have plunged 30% on average, with prices in some markets, such as Las Vegas, Phoenix and parts of Florida, falling more than 60%. NAR’s Yun estimates home-equity losses from the housing meltdown totaled $7 trillion at the end of 2009.

Many housing-industry experts believe pricing will bottom soon, but the bears warn that it will probably be 2013 before the market noticeably rebounds. “The improvement that we’re going to see off the bottom will be anemic” for quite some time, says Curran.

“Some markets still have further [down] to go, but we’re definitely in the latter innings of the downturn,” says David Goldberg, an analyst at UBS. “Even if there’s another leg down, we definitely think by [late] 2010 we will have seen the bottom of housing.”

The government’s decision to extend the $8,000 first-time home-buyer tax credit to mid-2010 and expand the program to include a $6,500 credit for non-first-time home buyers will likely help lure home shoppers into the market. Also, the slide in prices is making homes more affordable. Notes Burns: “If you go to Phoenix, it’s $800 a month to buy a brand-new house,” making it more affordable than renting.

There have already been mixed signs of stabilization in price and demand. Home prices rose month over month for six consecutive months through October, according to Standard & Poor’s Case-Shiller Home Price Composite 10 Index, although prices are still down year over year. However, the most recent figures from NAR indicate that pending sales of existing homes fell 16% in November. Such mixed signals, analysts say, will be the housing market’s message for some months to come.

Time

The Obama administration’s $75 billion program to protect homeowners from foreclosure has been widely pronounced a disappointment, and some economists and real estate experts now contend it has done more harm than good.

Since President Obama announced the program in February, it has lowered mortgage payments on a trial basis for hundreds of thousands of people but has largely failed to provide permanent relief. Critics increasingly argue that the program, Making Home Affordable, has raised false hopes among people who simply cannot afford their homes.

As a result, desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. Some borrowers have seen their credit tarnished while falsely assuming that loan modifications involved no negative reports to credit agencies.

Some experts argue the program has impeded economic recovery by delaying a wrenching yet cleansing process through which borrowers give up unaffordable homes and banks fully reckon with their disastrous bets on real estate, enabling money to flow more freely through the financial system.

“The choice we appear to be making is trying to modify our way out of this, which has the effect of lengthening the crisis,” said Kevin Katari, managing member of Watershed Asset Management, a San Francisco-based hedge fund. “We have simply slowed the foreclosure pipeline, with people staying in houses they are ultimately not going to be able to afford anyway.”

Mr. Katari contends that banks have been using temporary loan modifications under the Obama plan as justification to avoid an honest accounting of the mortgage losses still on their books. Only after banks are forced to acknowledge losses and the real estate market absorbs a now pent-up surge of foreclosed properties will housing prices drop to levels at which enough Americans can afford to buy, he argues.

“Then the carpenters can go back to work,” Mr. Katari said. “The roofers can go back to work, and we start building housing again. If this drips out over the next few years, that whole sector of the economy isn’t going to recover.”

The Treasury Department publicly maintains that its program is on track. “The program is meeting its intended goal of providing immediate relief to homeowners across the country,” a department spokeswoman, Meg Reilly, wrote in an e-mail message.

But behind the scenes, Treasury officials appear to have concluded that growing numbers of delinquent borrowers simply lack enough income to afford their homes and must be eased out.

In late November, with scant public disclosure, the Treasury Department started the Foreclosure Alternatives Program, through which it will encourage arrangements that result in distressed borrowers surrendering their homes. The program will pay incentives to mortgage companies that allow homeowners to sell properties for less than they owe on their mortgages — short sales, in real estate parlance. The government will also pay incentives to mortgage companies that allow delinquent borrowers to hand over their deeds in lieu of foreclosing.

Ms. Reilly, the Treasury spokeswoman, said the foreclosure alternatives program did not represent a new policy. “We have said from the start that modifications will not be the solution for all homeowners and will not solve the housing crisis alone,” Ms. Reilly said by e-mail. “This has always been a multi-pronged effort.”

Whatever the merits of its plans, the administration has clearly failed to reverse the foreclosure crisis.

In 2008, more than 1.7 million homes were “lost” through foreclosures, short sales or deeds in lieu of foreclosure, according to Moody’s Economy.com. Last year, more than two million homes were lost, and Economy.com expects that this year’s number will swell to 2.4 million.

“I don’t think there’s any way for Treasury to tweak their plan, or to cajole, pressure or entice servicers to do more to address the crisis,” said Mark Zandi, chief economist at Moody’s Economy.com. “For some folks, it is doing more harm than good, because ultimately, at the end of the day, they are going back into the foreclosure morass.”

Mr. Zandi argues that the administration needs a new initiative that attacks a primary source of foreclosures: the roughly 15 million American homeowners who are underwater, meaning they owe the bank more than their home is worth.

Increasingly, such borrowers are inclined to walk away and accept foreclosure, rather than continuing to make payments on properties in which they own no equity. A paper by researchers at the Amherst Securities Group suggests that being underwater “is a far more important predictor of defaults than unemployment.”

From its inception, the Obama plan has drawn criticism for failing to compel banks to write down the size of outstanding mortgage balances, which would restore equity for underwater borrowers, giving them greater incentive to make payments. A vast majority of modifications merely decrease monthly payments by lowering the interest rate.

Mr. Zandi proposes that the Treasury Department push banks to write down some loan balances by reimbursing the companies for their losses. He pointedly rejects the notion that government ought to get out of the way and let foreclosures work their way through the market, saying that course risks a surge of foreclosures and declining house prices that could pull the economy back into recession.

“We want to overwhelm this problem,” he said. “If we do go back into recession, it will be very difficult to get out.”

Under the current program, the government provides cash incentives to mortgage companies that lower monthly payments for borrowers facing hardships. The Treasury Department set a goal of three to four million permanent loan modifications by 2012.

“That’s overly optimistic at this stage,” said Richard H. Neiman, the superintendent of banks for New York State and an appointee to the Congressional Oversight Panel, a body created to keep tabs on taxpayer bailout funds. “There’s a great deal of frustration and disappointment.”

As of mid-December, some 759,000 homeowners had received loan modifications on a trial basis typically lasting three to five months. But only about 31,000 had received permanent modifications — a step that requires borrowers to make timely trial payments and submit paperwork verifying their financial situation.

The government has pressured mortgage companies to move faster. Still, it argues that trial modifications are themselves a considerable help.

“Almost three-quarters of a million Americans now are benefiting from modification programs that reduce their monthly payments dramatically, on average $550 a month,” Treasury Secretary Timothy F. Geithner said last month at a hearing before the Congressional Oversight Panel. “That is a meaningful amount of support.”

But mortgage experts and lawyers who represent borrowers facing foreclosure argue that recipients of trial loan modifications often wind up worse off.

In Lakeland, Fla., Jaimie S. Smith, 29, called her mortgage company, then Washington Mutual, in October 2008, when she realized she would get a smaller bonus from her employer, a furniture company, threatening her ability to continue the $1,250 monthly mortgage payments on her three-bedroom house.

In April, Chase, which had taken over Washington Mutual, lowered her payment to $1,033.62 in a trial that was supposed to last three months.

Ms. Smith made all three payments on time and submitted required documents, Chase confirms. She called the bank almost weekly to inquire about a permanent loan modification. Each time, she says, Chase told her to continue making trial payments and await word on a permanent modification.

Then, in October, a startling legal notice arrived in the mail: Chase had foreclosed on her house and sold it at auction for $100. (The purchaser? Chase.)

“I cried,” she said. “I was hysterical. I bawled my eyes out.”

Later that week came another letter from Chase: “Congratulations on qualifying for a Making Home Affordable loan modification!”

When Ms. Smith frantically called the bank to try to overturn the sale, she was told that the house was no longer hers. Chase would not tell her how long she could remain there, she says. She feared the sheriff would show up at her door with eviction papers, or that she would return home to find her belongings piled on the curb. So Ms. Smith anxiously set about looking for a new place to live.

She had been planning to continue an online graduate school program in supply chain management, and she had about $4,000 in borrowed funds to pay tuition. She scrapped her studies and used the money to pay the security deposit and first month’s rent on an apartment.

Later, she hired a lawyer, who is seeking compensation from Chase. A judge later vacated the sale. Chase is still offering to make her loan modification permanent, but Ms. Smith has already moved out and is conflicted about what to do.

“I could have just walked away,” said Ms. Smith. “If they had said, ‘We can’t work with you,’ I’d have said: ‘What are my options? Short sale?’ None of this would have happened. God knows, I never would have wanted to go through this. I’d still be in grad school. I would not have paid all that money to them. I could have saved that money.”

A Chase spokeswoman, Christine Holevas, confirmed that the bank mistakenly foreclosed on Ms. Smith’s house and sold it at the same time it was extending the loan modification offer.

“There was a systems glitch,” Ms. Holevas said. “We are sorry that an error happened. We’re trying very hard to do what we can to keep folks in their homes. We are dealing with many, many individuals.”

Many borrowers complain they were told by mortgage companies their credit would not be damaged by accepting a loan modification, only to discover otherwise.

In a telephone conference with reporters, Jack Schakett, Bank of America’s credit loss mitigation executive, confirmed that even borrowers who were current before agreeing to loan modifications and who then made timely payments were reported to credit rating agencies as making only partial payments.

The biggest source of concern remains the growing numbers of underwater borrowers — now about one-third of all American homeowners with mortgages, according to Economy.com. The Obama administration clearly grasped the threat as it created its program, yet opted not to focus on writing down loan balances.

“This is a conscious choice we made, not to start with principal reduction,” Mr. Geithner told the Congressional Oversight Panel. “We thought it would be dramatically more expensive for the American taxpayer, harder to justify, create much greater risk of unfairness.”

Mr. Geithner’s explanation did not satisfy the panel’s chairwoman, Elizabeth Warren.

“Are we creating a program in which we’re talking about potentially spending $75 billion to try to modify people into mortgages that will reduce the number of foreclosures in the short term, but just kick the can down the road?” she asked, raising the prospect “that we’ll be looking at an economy with elevated mortgage foreclosures not just for a year or two, but for many years. How do you deal with that problem, Mr. Secretary?”

A good question, Mr. Geithner conceded.

“What to do about it,” he said. “That’s a hard thing.”

The New York Times

After four months of gains, home prices flattened in October. Worse yet, industry insiders think that they’ll soon start to fall.

Prices have risen more than 3% since May, according to S&P/Case-Shiller.

But most forecasts predict price declines in 2010, with possible losses ranging from anywhere from 3% on up. Fiserv Lending Solutions, a financial analytics firm, forecasts that prices will fall in all but 39 of the 381 markets it covers, with an average drop of 11.3%.

“We’ve seen recent price stabilization because of low mortgage interest rates and the impact of the first-time homebuyers tax credit,” said Pat Newport of IHS Global Research. “But there are really good reasons to think prices will now start going down.”

There are three main reasons for the reversal: a coming flood of foreclosures, rising interest rates and the eventual end of the tax credits.

For Gus Faucher, the director of macroeconomics for Moody’s Economy.com, the huge number of foreclosures that remain in the pipeline is the big problem.

Moody’s upped its estimate of defaults recently because of shortcomings of the government-led mortgage modification programs. Trial workouts are not being made permanent and completed modifications are re-defaulting at high rates.

“There are going to be fewer [successful] modifications than we thought,” said Faucher.

Even so, he added, much of the price decline has already occurred and Moody’s forecast is for only another 8% drop. The worst-hit markets will be the ones suffering the most foreclosures, places like Arizona, California, Florida and Nevada.

Resetting option ARMs (adjustable rate mortgages) will also aggravate the foreclosure problem. These mortgages allow borrowers to pick their own payments, which can be so low they don’t even cover the interest. Balances swell.

For many of the more than 350,000 option-ARM borrowers, it’s time to pay the piper. Their loans will change into fully amortizing mortgages that will carry much higher monthly payments. A very large percentage of these homeowners will default, according to Shari Olefson, author of “Foreclosure Nation: Mortgaging the American Dream.”

“We’ve still only seen the tip of the foreclosure iceberg,” she said.

She also predicts more strategic defaults, people deliberately walking away from even fixed-rate mortgages as the value of their homes dips well below the amount they owe.

Olefson’s forecast is for price declines of 5% to 15%, depending on the area, with a national median price drop of about 10% for 2010.

Also affecting prices will be higher interest rates. Some analysts, according to Newport, think rates for a 30-year mortgage will pass 6% next year as the government curtails housing market support.

The Federal Reserve has helped keep rates low through purchases of mortgage-backed securities. But that program is winding down and will end in March.

“The government is throwing everything at the market but the kitchen sink,” said Peter Schiff, president of Euro pacific Capital. “It can’t prop up housing markets forever.”

Schiff is among the bigger bears. Though he gave no specific prediction, he thinks prices — already down 29% from the peak — are only halfway to the bottom.

As a tool for supporting housing markets and prices, the tax credit for homebuyers is a two-edged sword. It reduces taxes dollar-for-dollar by up to $8,000 for new homebuyers and $6,500 for buyers who already own a home and should support home prices. But it ends at the end of April.

Many buyers will push their deals forward to get in before the deadline and then demand for homes could sink afterward.

One of the few bulls out there is NAR, whose chief economist, Lawrence Yun, is counting on the tax credit to provide temporary support for housing markets until the economy recovers enough to start fueling sales. He predicts price improvement in 2010 of more than 3%.

“The headwind we face is rising mortgage interest rates,” Yun said, “but the compensating factors will be the homebuyers tax credit in the first half of the year and increased job creation in the second half.”

NEW YORK (CNNMoney.com)

NEW YORK (AP) — Home prices rose for the fifth month in a row in October, but the recovery is shaky with only 11 of the 20 metro areas tracked showing gains.

The Standard & Poor’s/Case-Shiller home price index released Tuesday edged up 0.4 percent to a seasonally adjusted reading of 145.36 in October from September. Without adjusting for seasonal factors the index was flat.

The index was off 7.3 percent from October last year, nearly matching expectations of economists surveyed by Thomson Reuters. Many economists, however, are predicting a double dip in prices this winter as foreclosures increase and government support wanes.

“I’d be very surprised if we don’t go below the lows we hit this year,” Dean Baker, co-director of the Center for Economic and Policy Research, a left-leaning Washington think tank. “We still have a very glutted housing market.”

The index is now up 3.4 percent from its bottom in May, but still almost 30 percent below its peak in April 2006.

There are also wide variations from around the country. Prices have climbed for at least six months in a row in Denver, Washington, Minneapolis and San Francisco, for example.

“We saw an unusually low amount of inventory on the market,” which helped prices firm, said Frank Castaldini, an agent with Coldwell Banker in San Francisco.

Properties at the lower end — between $500,000 and $600,000 — also received multiple bids, partly due to a federal tax credit for first-time homebuyers, he said.

But in Chicago and Tampa, Fla., prices fell slightly from September. And there’s no sign of a bottom in Las Vegas, where prices have tumbled by more than 56 percent from their peak in April 2006.

“People hear prices are getting better, but they’re not here,” said Penny O’Brien, a real estate agent with Re/Max Experience in Las Vegas. “Unemployment has got people scared of purchasing.”

The tax credit didn’t make a big dent in the Las Vegas market either, O’Brien said, because many first-time buyers were elbowed out by all-cash investors.

Home prices play a key role in the economy. Homeowners feel wealthier when property values rise and are more likely to spend money. Rising prices also help millions of homeowners who owe more to the banks than their houses are worth.

The positive trend in home prices and a better employment outlook helped raise the Consumer Confidence Index to 52.9 in December, up from a revised 50.6 the month before, the Conference Board reported Tuesday. While far below a 90 reading that would signify a solid economy, consumers’ outlook on jobs over the next six months reached its highest level in two years.

The federal government has stepped in with far reaching programs to create jobs and make homeownership more affordable.

Home price gains since the summer reflect the rush of homebuyers trying to close their deals before the original expiration date of a federal tax credit. The Nov. 30 deadline was extended last month to April 30.

Besides a credit of up to $8,000 for first-time buyers, Congress expanded the program to include homeowners who have lived in their current properties for at least five years. They can now claim a tax credit of up to $6,500 if they relocate.

The Federal Reserve is also buying up $1.25 trillion in mortgage-backed securities to help keep interest rates at historical lows.

___

AP Real Estate Writer Alan Zibel in Washington contributed to this report.

J.W. ELPHINSTONE
Chicago Tribune

In changing times with a very volatile economic market, the impacts of the “bailout” prove that our national financial system has been tarnished but the hope for repair is the result of the country’s ability to stand up and fight through the turmoil. The economic repercussions of the “bailout” while, hopeful, may still not be enough to help our housing market recover from the immense distress we face as a nation. However, with the economy in such a difficult place, it seems that there is no other quick immediate solution to save what is left. The market is oversaturated with listing inventory and this “bailout” will hopefully deplete the mass housing for sale. In a buyer’s market, it is critical to move inventory quickly to stabilize the market conditions so that prices can equalize. The rescue plan will provide solutions for distressed home-owners and possibly even save the mass thousands out there who face foreclosure. Even so, the possibility of resolution from financial destruction is very real for the mass public so the immediate effects of the “bailout” may not impact the majority population who is suffering and losing their homes. It is hard to really predict the consequences of this emergency plan but the fact that our national governmental body has stepped in is a significant indicator that our country is in some pretty significant trouble. Our best bet is to listen closely, assess our personal situations and consult professionals who can direct and advise us to a better place. This economy and this market should correct itself and now with a helping hand should put us on the path to recovery. Who knows, this may be the case or this may just be the beginning. Regardless, our confidence should rest in our own decisions based on our own personal scenarios. While we depend on our country to do the right thing, the only final judge of that is ourselves.

Regard to our shifting market,

Helen Oliveri

NEW YORK (CNNMoney.com) — After two weeks of contentious and often emotional debate, the federal government’s far-reaching and historic plan to bail out the nation’s financial system was on the verge of enactment Friday.

President Bush, speaking less than an hour after the House voted 263 to 171 to pass the bill, is expected to sign it later Friday.

“By coming together on this legislation, we have acted boldly to prevent the crisis on Wall Street from becoming a crisis in communities across our country,” said Bush.

The House vote followed a strong lobbying push by the White House and other supporters of the bill. The House rejected a similar measure on Monday – a defeat that shocked the markets and congressional leaders on both sides of the aisle.

The legislation, which would allow the Treasury Secretary to purchase as much as $700 billion in troubled assets in a bid to kick-start lending, would usher in one of the most far-reaching interventions in the economy since the Great Depression.

Federal Reserve Chairman Ben Bernanke said he welcomed the House vote. “The legislation is a critical step toward stabilizing our financial markets and ensuring an uninterrupted flow of credit to households and businesses,” he said.

Treasury Secretary Henry Paulson said he would act swiftly but “methodically” to carry out the plan.

“The broad authorities in this legislation, when combined with existing regulatory authorities and resources, gives us the ability to protect and recapitalize our financial system as we work through the stresses in our credit markets,” Paulson said.

RISMEDIA, Oct. 2, 2008-(MCT/RISMedia)-In an historic vote, the Senate approved a massive $700 billion rescue plan for the nation’s finance system Wednesday night, but only after tacking on another $110 billion in tax breaks to lure votes from both parties.

A strong bipartisan majority rallied behind the controversial Wall Street bailout package, passing it by 74-25.

The vote sends the measure to an uncertain fate in the House of Representatives, where lawmakers rejected the original version on Monday, 228-205. A new House vote is expected on Friday, and many lawmakers in both parties there remain opposed to it.

President Bush, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke have warned repeatedly that failure to pass the legislation would lead vital credit markets to seize up, forcing employers to lay off employees, plunging the economy into recession and perhaps even another Great Depression.

Senators of both parties, including Democratic presidential nominee Barack Obama of Illinois and Republican presidential nominee John McCain of Arizona, said that threat made it imperative for Congress to pass the financial-rescue package.

“Inaction is not an option,” said Senate Majority Leader Harry Reid of Nevada. “This is-I repeat-a crisis…We’ve got to get this done.”

Senate Republican Leader Mitch McConnell of Kentucky agreed.

“The question is not how we got here, but how we get out,” McConnell said.
Not all senators went along.

“Action is clearly needed to return stability to our financial markets, but most importantly, effective, sound action is needed. To fix the markets, we must deliver a market-based solution, not a government bailout,” said Sen. Elizabeth Dole, R-N.C.

Many lawmakers voiced disdain for the extra tax breaks the Senate added to the financial-rescue package. They ranged from a one-year fix to prevent the alternative-minimum tax from hitting more taxpayers to extending the research credit for business to allowing rural utilities to issue tax-exempt bonds for use of renewable energy.

The federal government’s multi-billion-dollar bailout of bad mortgage debt could be a game-changer for home buyers, sellers and real estate professionals.

But how much may not be clear for months, maybe even a year.

In the short term, according to Jay Brinkmann, chief economist for the Mortgage Bankers Association, the government’s plan to greatly expand purchases of mortgage backed securities by the Treasury, Fannie Mae and Freddie Mac, should “provide a signal to the market that there’s going to be an underlying floor on (interest) rates.”

That’s because when the Treasury buys mortgage securities — and it’s pledging $10 billion for this month alone, plus lots more to come – it has the effect of pumping fresh capital into the mortgage market, allowing more home loans to be made at more favorable rates.

Now, although rates should remain low, currently they’re close to 6 percent for 30-year fixed rate loans on average — that doesn’t mean it’ll be easier to qualify for a home purchase if you’ve got damaged credit or an income too low to pay for what you want to buy.

Those days are over for years to come.

What about the larger economic impacts of the bailout plan? Again, we’re at the earliest stages of this whole process, but if the plan brings a sense of stability to the financial markets, then, absolutely, the net effect should be to restore confidence.

And consumer confidence is an essential ingredient for a home buying recovery. People who are worried about the safety of their money market investments and bank deposits aren’t good candidates for purchasing houses — even at rock bottom prices.

But the reverse is true as well: Greater consumer confidence in the financial marketplace — along with modest interest rates and attractive prices — could kick the whole cycle into gear and get housing moving again.

There’s another factor here too: Without the big bailout plan, hundreds of thousands of financially distressed homeowners were on a non-stop conveyor belt to foreclosure. But when the government takes over mortgage portfolios, it’s likely there’ll be at least temporary halts to foreclosures and massive efforts to “work out” the terms of delinquent loans to enable owners to make payments at levels they can afford.

For neighborhoods hard hit by foreclosures — and the distressed owners themselves — that will definitely be a game changer.