Senate leaders agree to housing crisis bill
WASHINGTON (AP) - April 2, 2008 The scaled-back proposal released by Majority Leader Harry Reid,
D-Nev., and GOP Leader Mitch McConnell of Kentucky contains an
amalgam of ideas aimed at boosting demand for housing and helping
homeowners saddled with subprime mortgages avoid foreclosure.
For instance, the plan contains $4 billion in grants to local
governments to buy and refurbish foreclosed homes, new authority
for states to issue bonds to be used to refinance subprime
mortgages and a $7,000 tax credit for people buying new homes or
properties in foreclosure.
"It is a robust package," Reid said. "This is good news for
the American people."
But economists across the political spectrum sounded skeptical
that the measure would have much practical effect to ease the
wrenching crisis in the housing market and the wave of foreclosures
spreading across the country.
"They're good steps, but they're small steps and certainly not
big enough steps to solve the problem," said Mark Zandi, chief
economist for Moody's Economy.com. "I don't think it's going to be
enough to solve the housing problem, at least not in 2008."
Reid did not release details, but staff aides described a
still-being-drafted measure containing several elements from a bill
Democrats have touted for weeks.
The measure also contains a provision dropped from February's
stimulus measure that would permit homebuilders and other
money-losing businesses to reclaim previously paid taxes, new
disclosure requirements aimed at preventing unsophisticated
borrowers from being duped by mortgage brokers, and additional
money to provide counseling to people threatened with foreclosure
and help them in negotiating with their lenders.
Republicans forced Democrats to drop efforts that Zandi and
other economists said might have proven more effective in
alleviating the crisis, including a controversial plan opposed by
banks and their GOP allies to change bankruptcy laws to help
borrowers trapped in subprime mortgages keep their homes.
Banking Committee Chairman Christopher Dodd, D-Conn., was forced
to leave out of the bill a plan to have the Federal Housing
Administration guarantee perhaps $400 billion worth of refinanced
loans if lenders reduce loan amounts to reflect reduced home
values.
The measure will contain a broader rewrite of the FHA that
reduces down payments on FHA-insured loans and raises the dollar
limit on mortgages that FHA can insure.
"This package addresses the core issues of this crisis,
including foreclosure mitigation, mortgage counseling, FHA
modernization and homeowner tax credits, among other provisions,"
Reid and McConnell said in a joint statement.
Reid said he hoped the measure could quickly pass, though it
faces a flurry of amendments from senators in both parties.