Home mortgage aid plan approved by House
The Associated Press
WASHINGTON -- The House on Thursday passed an extensive homeowner-rescue plan to provide cheaper, government-backed mortgages to half a million debt-ridden borrowers and bolster an economy crippled by the housing crisis.
Defying veto threats from President Bush, the House approved the measure 266-154, with 39 Republicans -- mostly from areas suffering worst from housing woes -- supporting it.
It would let the Federal Housing Administration take on up to $300 billion in new mortgages so that financially strapped borrowers facing foreclosure could refinance.
The plan by Rep. Barney Frank, D-Mass., is the centerpiece of a broader package of bills approved Thursday that Democrats say will prevent more foreclosures and help homeowners and communities deal with the fallout from the mortgage meltdown.
"We are in a recession, and the major cause of that is the subprime crisis," said Frank, the House Financial Services Committee chairman. "Diminishing the number of foreclosures is in the interest not simply of those who will avoid foreclosure, but people in their neighborhood, [in] the cities in which they are located, and the whole economy."
The measure is targeted at homeowners facing default, including many who owe more than their houses are worth.
For instance, a homeowner who owes $290,000 on a house now worth $225,000 could refinance into an FHA-backed loan if the mortgage holder was willing to take a loss of about 36 percent. The borrower's monthly mortgage payments would fall from $2,200 to about $1,200.
Loan holders would have an incentive to participate, proponents believe, because the alternative would be costly foreclosures, which can involve losses of 50 percent or more.
Supporters hope that the package -- which awaits action in the Senate -- will serve as the basis for a broad bipartisan housing compromise that could satisfy both parties' keen appetite for delivering election-year aid to anxious constituents.
But Bush's veto warnings, bolstered by staunch GOP opposition, are clouding its prospects.
"House Democrats passed bills that they know will never become law. Most Americans understand that we shouldn't create a taxpayer-funded bailout for lenders and speculators," said Tony Fratto, a White House spokesman.
Under Frank's plan, homeowners currently considered too risky to qualify could refinance into FHA-backed loans if their lenders agreed to take substantial losses on the original mortgages. Borrowers would have to show that they could afford to make payments on the new loans. They would have to share with FHA at least half of their proceeds if they profited from selling or refinancing again.
The plan is projected to cost $2.7 billion over the next five years.
Republican backers said they were putting aside their philosophical objections to a government-based rescue due to the severity of the housing crisis that has hit their constituents.
Proponents say it will prevent blight in neighborhoods plagued by abandoned, foreclosed homes.
Democrats, seeking Republican support for Frank's housing plan, also added a grab bag of measures Bush has sought.
Those include legislation to overhaul the FHA, to more tightly regulate government-sponsored mortgage giants Fannie Mae and Freddie Mac, and authority for state and local housing-finance agencies to use tax-exempt bonds to refinance distressed subprime mortgages.
They also attached a housing tax credit of up to $7,500 for first-time home buyers, to be paid back over 15 years.
