Mortgage relief for 400,000 struggling homeowners was approved by congress on Saturday as part of an election-year housing plan that also aims to calm jumpy financial markets and boost the slumped economy. Despite reservations, President Bush said he would sign it promptly.
The measure is regarded as the most significant housing legislation in decades. It will allow homeowners who cannot afford their payments refinance into more affordable government-backed loans rather than losing their homes.
For troubled mortgage companies Fannie Mae and Freddie Mac it means a temporary financial lifeline and tightens controls over the two government-sponsored businesses.
The Senate voted 72-13 to send the bill to the president; the House passed it Wednesday, In a rare Saturday session.
Bush had withdrawn his veto threat earlier in the week over $3.9 billion in neighborhood grants. He state the money would benefit lenders who helped cause the mortgage meltdown, encouraging them to foreclose rather than work with borrowers.
Tony Fratto, deputy White House press secretary said, "Because of the Democratic Congress' delays and the need for action now, President Bush will sign this bill when he receives it, despite our concerns with some provisions, including nearly $4 billion to help lenders, not the homeowners this legislation is intended to serve.
Many Republicans were eager to get behind a housing rescue as they looked ahead to tough re-election contests, particularly those from areas hit hardest by housing woes. Treasury Secretary Henry M. Paulson's request for the emergency power to rescue Fannie Mae and Freddie Mac helped push through the measure. As Republicans long have sought, so did the creation of a regulator with stronger reins on the government-sponsored companies, Democrats won cherished priorities in the bargain: the aid for homeowners, a permanent affordable housing fund financed by Fannie Mae and Freddie Mac, and the neighborhood grants.
Senator Christopher J. Dodd, chairman of the Senate Banking, Housing and Urban Affairs Committee, "This is far more than sending a bill to the president's desk for his signature. It's sending a message to the American people that the Congress of the United States , despite an alternative reputation , can actually get things done, and can work together to achieve a good result." Still, Republicans weren't eager to celebrate. Bush was not expected to hold a White House signing ceremony, and Senate GOP leaders didn't mention it at a news conference following the vote. In the House, more than three-quarters of Republicans voted against the bill.
The legislation takes several approaches to curing the ailing housing market.
It aims to save an estimated 400,000 debt-strapped homeowners from foreclosure by allowing them to get more affordable mortgages backed by the Federal Housing Administration, many of whom owe more their houses are worth.
The FHA could insure $300 billion in such mortgages, which would be available to homeowners who showed they could afford a new loan. In exchange for avoiding an often-costly foreclosure, banks would first have to agree to take a large loss on the existing loans.
The plan also is designed to relieve a broader credit crunch that has taken hold because of rising defaults and falling home values. To free up safer and more affordable mortgage credit, the bill permanently would increase to $625,000 the size of home loans that Fannie Mae and Freddie Mac can buy and the FHA can insure. They also could buy and back mortgages 15 percent higher than the median home price in certain areas.
The measure tries to prevent harm in areas hardest hit by the housing crisis, where waves of foreclosures have left properties sitting abandoned, dragging down property values and ruining neighborhoods. It sends $3.9 billion to such neighborhoods to buy and fix up foreclosed properties.
However, it goes far beyond addressing the current crisis, however.
The legislation overhauls the Depression-era FHA. It requires lenders to show how high a borrower's payment could get under the terms of his mortgage. It provides $180 million in pre-foreclosure counseling for struggling homeowners.
Until the end of 2009, the Treasury Department gains unlimited power to lend money to Fannie Mae and Freddie Mac or buy their stock should they need it. The Federal Reserve takes on a new "consultative" role overseeing the companies.
The measure includes $15 billion in tax cuts, including a significant expansion of the low-income housing tax credit and a credit of up to $7,500 for first-time home buyers for houses purchased between April 9, 2008, and July 1, 2009.
Conservative Republicans were intensely opposed to the bill, particularly the help for Fannie Mae and Freddie Mac. Critics charge the companies enjoy lavish profits in good times and wield their outsized political clout to resist regulation while depending on the government to bail them out should they falter.
Sen. Jim DeMint, R-S.C., delayed the final vote because Democrats refused to allow him a vote on a proposal to ban the companies from lobbying or making political donations to lawmakers.
Contributed by MLR Realty
Home