Dolan Alert: What the Housing Bill Means for You

As if the estimated $1.4 trillion that the government has already made available to refinance mortgage debt since the housing meltdown began wasn't enough...another $300 billion of relief was recently approved by Congress and signed into law by President Bush.

Unfortunately, this is equivalent of putting a Band-Aid on a seriously injured patient.

The bill purportedly helps 400,000 homeowners having trouble making their mortgage payments by providing $300 billion in loans to allow many of them to refinance at lower rates. That's all well and good, but it doesn't address the real problem.

Those people still living in their homes could sell them on the open market if they needed to. The real problem is the tens of thousands of homes that are now empty because the owners never should have gotten the mortgages to begin with.

During the sub-prime boom, lenders foolishly financed these home purchases to non-creditworthy home buyers. Now, during the sub-prime bust, most of those homes are worth less than the amount still owed on them, so the owners have packed up and left. Of course, there are also plenty of homes built, mortgaged and now abandoned by speculators.

This surplus of abandoned homes, many of which are decrepit, is decaying the entire system, bringing down the national housing market, swelling mortgage debt and ultimately reducing consumer buying power and confidence because of the lack of equity being built up in homes. A just-released index from Standard & Poor's shows housing prices fell more than 15% in the second quarter, the largest decline ever.

Rather than continuing to finance more homes in an already glutted home market, our government should consider demolishing the unsalvageable ones to preserve some vestige of value for the rest of us responsible homeowners.

Here's another point you may not realize: Since Freddie Mac and Fannie Mae are, technically, supported by taxpayers, that means you are now part owner to tens of thousands of homes – many in decrepit condition. It is likely that Fannie and Freddie (and therefore all of us) will own many more homes as bank failures continue.

The government is trying to help people start buying homes again, but here's a news flash: With gas, food and everything else costing more these days, many people just don't have the money to buy a home right now.

It's a very serious situation, and we don't see it getting any better anytime soon. We want to make sure you're making the smartest moves with your money in this critical time, so let's talk about the key provisions of the new housing bill, how they apply to you, and what you can do now:

Next: Provision 1 - First-time homeowner tax credit