Housing rescue passes key test
WASHINGTON (AP) - June 24, 2008 The Senate voted 83-9 to speed up work on the $300 billion
mortgage aid plan, putting it on track for a final vote as early as
the end of the day.
The resounding vote reflected a keen interest in both parties in
claiming election-year credit for helping homeowners amid tough
economic times.
Still, the measure faces a veto threat from President Bush and
disputes among Democrats about key details. Those challenges will
probably delay any final deal until mid-July.
Sen. Christopher J. Dodd, D-Conn., the Banking Committee
chairman, said the legislation "would allow us to begin to put a
tourniquet on the hemorrhaging of foreclosures in this country."
"What better gift on independence could we give the American
people than a sense that this, their Congress of the United States,
can come together, despite political differences, and craft
legislation to make a difference for our country," Dodd said.
Senate passage would set the stage for high-stakes negotiations
to resolve Democrats' differences. Conservative Democrats known as
"Blue Dogs" are concerned about how to pay for the measure, while
members of the Congressional Black Caucus - most of them liberal -
call it "unacceptable," arguing it doesn't do enough to address
the needs of African Americans.
Leaders also are divided on how high to place loan limits that
apply to government mortgage insurance and financing.
The centerpiece of the package is a foreclosure rescue program
in which the Federal Housing Administration would provide $300
billion in new, cheaper mortgages for distressed homeowners who
otherwise would be considered too financially risky to qualify for
government-insured, fixed-rate loans.
Borrowers would be eligible for the housing rescue if their
mortgage holders were willing to take a substantial loss and allow
them to refinance, and would ultimately have to share with the
government a portion of any profits they made from selling or
refinancing their properties.
The measure was advancing as a widely watched housing index said
U.S. home prices fell in April at their steepest rate since the
index began in 2000. The Standard & Poor's/Case-Shiller home price
index of 20 cities fell by 15.3 percent in April versus a year ago,
according to Tuesday's report.
A separate report from the Office of Federal Housing Enterprise
Oversight said U.S. home prices fell 4.6 percent in April from the
same month last year, when the index peaked. The government index
is calculated using mortgage loans of $417,000 or less.
The bill would tighten controls and create a new regulator for
Fannie Mae and Freddie Mac, which provide huge amounts of cash flow
to the mortgage market by buying home loans from banks.
It also would provide a $14.5 billion array of tax breaks,
including a credit of up to $8,000 for first-time homebuyers who
buy a home in the next year and boosts in low-income tax credits
and mortgage revenue bonds.
In a letter to Democratic leaders last week, the 42 House
members of the Black Caucus said the bill is plagued with "glaring
omissions," including affordable housing funds for states affected
by Hurricane Katrina and grants for states and localities to buy
and fix up foreclosed properties.
To draw GOP support, Senate Democrats diverted the affordable
housing money to pay for the foreclosure aid program.
The Senate bill provides $3.9 billion in grants to deal with
foreclosed properties - compared with a House plan providing $15
billion - but the White House singled out the funds in its veto
threat, and Blue Dogs are demanding that the money be offset with
cuts elsewhere.
Rep. Barney Frank, D-Mass., the Financial Services Committee
chairman, said he'd be willing to yank the money and add it to a
separate measure in the interests of a deal.