House passes mortgage rescue plan
WASHINGTON,
Jul 24 -
By: Marilyn Geewax
Austin American Statesman
WASHINGTON — More than two years into the nation's housing downturn, Congress put a massive mortgage rescue and reform bill on a fast track Wednesday.
In a reversal, President Bush conceded that the measure was too important to veto. Hours later, the American Housing Rescue and Foreclosure Prevention Act won House approval on a 272-152 vote. The Senate is expected to pass it as early as Friday.
The bill would provide help to millions of borrowers, lenders and others coping with the worst housing market since the Great Depression. But taxpayers could feel the bite: There's a risk the rescue plan might cost more than $100 billion.
Under the legislation, homeowners sliding toward foreclosure will find it easier to refinance their loans. Regulators will get tougher rules to end bad lending practices. Troubled mortgage finance giants Fannie Mae and Freddie Mac will get new federal lifelines. First-time home buyers will get tax breaks. Local governments will get money to clean up neighborhoods devastated by foreclosures.
Treasury Secretary Henry Paulson said it wasn't difficult to persuade the president to drop his veto threat because "he understands the importance of this topic."
Paulson said he would push for enactment of the bill by week's end. Despite disappointment with some of the legislation, he said "portions of this bill are orders of magnitude more important to turning the corner on the housing correction and supporting our markets and our economy."
House Majority Leader Steny Hoyer, D-Md., said the legislation would help end "the vicious cycle of foreclosures" by allowing at least 400,000 struggling borrowers to refinance their mortgages to avoid default. That would help prevent any worsening of "the mortgage crisis that is rocking our economy," he said.
The legislation offsets its costs with revenue increases. But opponents pointed to the danger of its new authority for the Treasury to extend credit to Freddie Mac and Fannie Mae and even to buy their stock if necessary, an unprecedented breach of the financial barriers between the U.S. government and private corporations.
The nonpartisan Congressional Budget Office said a provision that would give Treasury temporary authority to increase its line of credit to Freddie Mac and Fannie Mae most likely wouldn't be used, so wouldn't cost taxpayers anything. But it said if Treasury did have to act, the cost probably would be $25 billion, and that there was a slight chance it could exceed $100 billion.
That's one major reason many Republicans remain unhappy about the bill. House Minority Leader John Boehner, R-Ohio, said he was "deeply disappointed" at Bush's decision to back the bill. Boehner said the bill's passage would amount to "placing taxpayers on the hook for billions and billions of dollars."
Rep. John Carter, R-Round Rock, also said the legislation "is a bad bill for American taxpayers."
In the Central Texas delegation, Carter was joined by fellow Republican Reps. Michael McCaul of Austin and Lamar Smith of San Antonio in voting against the bill. Austin's Democratic Rep. Lloyd Doggett voted for it.
In a reflection of the political power of the housing crisis in an election year, 45 of the 199 Republicans in the House voted to approve the legislation. Only three Democrats opposed the bill.
In the Senate, Banking Committee Chairman Chris Dodd, D-Conn., and the committee's senior Republican, Richard Shelby of Alabama, gave their blessing to the House version, saying they wouldn't try to amend it. "This is the most important piece of housing legislation in a generation," Dodd said.
But some Republicans say they will keep trying to thwart its passage in the Senate. Another provision that particularly rankles them would provide more than $3.9 billion in grants to states and localities for the purchase and rehabilitation of foreclosed homes, which Carter described as "a $4 billion slush fund that allows state and local governments to buy foreclosed properties from lenders that are the root of the problem — and charging it to taxpayers."
But supporters say entire neighborhoods are being pulled down by dilapidated vacant properties. Cleaning up blight would stabilize prices for everyone, they argue.
The bill also would help shore up more expensive neighborhoods by raising the limit on mortgages that Fannie Mae and Freddie Mac can purchase and package as securities. Known as the conforming loan limit, the bill would increase the cap to $625,000 in high-cost areas such as South Florida, California and the Northeast, up from $417,000.
Even people who don't yet own homes will get help. The legislation includes a tax credit for first-time home buyers, up to $7,500, that is available until July 1, 2009.
The White House said that while it has some objections to the bill, most "provisions are too important to the stability of our nation's housing market, financial system, and the broader economy not to be enacted immediately."
- Additional material from The Associated Press and Los Angeles Times.
