On July 30, President George W. Bush signed into law a massive housing stimulus package (H.R. 3221) that allows the Treasury Department to provide capital to Fannie Mae and Freddie Mac.

The Housing and Economic Recovery Act of 2008 includes a new regulatory regime for Fannie Mae and Freddie Mac and incorporates Treasury Secretary Henry Paulson's temporary plan to help capitalize the housing firms in the event of a financial crisis. His plan will:

Temporarily increase the line of credit Fannie Mae and Freddie Mac can each draw from the federal government,

Allow Treasury to purchase stock equity in Fannie Mae and Freddie Mac, and

Grant the Federal Reserve new authority to consult their regulators on setting capital standards for Fannie Mae and Freddie Mac.

The underlying bill, which the Senate passed 72-13 on July 26 and the House passed by a vote of 272-152 on July 23, will revamp oversight Fannie Mae, Freddie Mac and the Federal Home Loan Bank System (FHLBS). The bill also will overhaul the Federal Housing Administration’s (FHA) mortgage insurance program and allow FHA to guarantee up to $300 billion in new loans for at-risk sub-prime borrowers.

Additionally, the legislation contains a $7,500 tax credit for first-time home buyers that must be repaid to the government over a 15-year period, a provision to allow non-itemizers to use a standard deduction of property taxes of up to $1,000 and a temporary increase in the low-income housing tax credit.

Unfortunately, in order to pay for the $15 billion package of tax incentives and comply with pay-go budgetary rules, Congress chose to use the electronic payment reporting requirement as an offset--a provision NSBA opposes.

The electronic payment reporting requirement will require credit and debit card companies as well as banks and financial institutions to report to the IRS each year the total credit card, debit card and electronic payment transactions for businesses. That information will be used to develop trends for determining industry “average” incomes, and used by the IRS in the future.

In addition to increased reporting, this provision will require credit and debit card companies to verify businesses' taxpayer identification number. If they are unable to do so, the credit and debit card companies will withhold and remit to the IRS 28 percent of the business sales until accurate information is confirmed.

According to Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Member Charles Grassley (R-Iowa), the provision will raise $9.5 billion in new revenues over 10 years and will exempt reporting of transactions for $10,000 or less in cases in which a third-party settlement organization handles fewer than 200 transactions. However,
these new requirements will lead to costly new processes for credit and debit card companies which will lead to increased fees being passed on to small-business owners.

During the signing, Bush stated that Treasury's proposal, along with the oversight changes, are necessary to help stabilize and increase confidence in the housing community.

Please click here for more information on the electronic payment reporting requirement.