On July 30, 2008, President Bush quietly signed one of the largest housing bills in decades to shore up struggling financial markets and a housing industry slump that is second only to that of the Great Depression. The Housing Assistance Act of 2008, signed after months of contentious negotiations, creates a $300 billion program to refinance troubled mortgages and creates new regulatory oversight of Fannie Mae (“Fannie”) and Freddie Mac (“Freddie”), which finance almost half of the country's $12 trillion in home mortgage debt.

It is estimated that 2.8 million homeowners will be at risk of losing their homes due to foreclosure by 2009. Funding provided by the new law is expected to help 400,000 such homeowners avoid that fate by trading their current loans for new affordable mortgages guaranteed through the Federal Housing Administration (“FHA”). The current mortgage-holder bank will have to agree to the trade. The benefit to the bank is a guaranteed loan and the avoidance of costly and time-consuming foreclosure proceedings.

Although Bush previously threatened to veto the measure, overwhelming support in Congress and desperate financial markets carried the day.

Key to the bill is an expanded line of credit for Fannie and Freddie to stem an impending crisis in investor confidence in the two private corporations that hold $1.6 trillion in combined debt to fund mortgage purchases. The new funding, however, is accompanied by the creation of new regulatory authority over the mortgage giants and an overhaul of the FHA.

Shares of Fannie and Freddie rallied shortly after the bill became law, and as securities regulators enforced an emergency rule to prevent "short selling," or betting against 19 major financial firms, including Fannie and Freddie. Earlier in the month, shares of Fannie and Freddie had been down 50 percent.