Rescue legislation sailed through the
House on Wednesday aimed at helping 400,000 strapped homeowners
avoid foreclosure and preventing troubled mortgage giants Fannie
Mae and Freddie Mac from collapsing.
The 272-152 vote reflected a
congressional push to send election- year help to struggling
borrowers and to reassure jittery financial markets about the
health of two pillars of the mortgage market.
Hours before the vote, President Bush
dropped his opposition to the measure, which is on track to pass
the Senate and become law within days.
The White House swallowed its distaste
for $3.9 billion in grants the bill would provide for devastated
neighborhoods. The Bush administration gains the power to throw
a lifeline to Fannie Mae and Freddie Mac as part of the measure
that also is designed to rein in the government-sponsored
mortgage firms.
The administration and lawmakers in both
parties teamed to negotiate the measure, which accomplishes
several Democratic priorities, including federal help for
homeowners, a new permanent, affordable housing fund financed by
Fannie and Freddie and the $3.9 billion for hard-hit
neighborhoods. The grants are for buying and fixing up
foreclosed properties.
"It is the product of a very significant
set of compromises," said Rep. Barney Frank, D-Mass., the
Financial Services Committee chairman. "We are dealing with the
consequences of bad decisions and inaction and malfeasance from
years before. Obviously, it requires a joint effort.
"In a statement on the bill, the White
House said parts of it "are too important to the stability of
our nation's housing market, financial system and the broader
economy not to be enacted immediately."
Bush had objected to the neighborhood
grants, saying they would help bankers and lenders, not
homeowners who are in trouble. Still, Dana Perino, the White
House press secretary, said a showdown with Congress over the
funds would be ill-timed.
It was a striking split for Bush and many
congressional Republicans. GOP leaders denounced the housing
legislation as a bailout for irresponsible homeowners and
unscrupulous lenders, even as they acknowledged it was probably
necessary.
"It's a bill that I wish I could support.
It's a bill that the market clearly needs . . . but this is not
a bill that I can support," said Rep. John A. Boehner, R-Ohio,
the minority leader.
The plan also creates a regulator with
tighter controls for Fannie Mae and Freddie Mac and modernizes
the agency. It includes $15 billion in housing tax breaks,
including a credit of up to $7,500 for first-time buyers.
It also increases the statutory limit on
the national debt by $800 billion, to $10.6 trillion.
Lawmakers abandoned efforts to place
conditions on any Fannie and Freddie rescue, but the bill hands
the new regulator approval power over the pay packages of
executives at the companies.
In his own words
Zachary Urban, Brothers Redevelopment,
manages the Colorado Foreclosure Hotline, 1-877-601-HOPE.
Urban says the bill might help 15 percent
to 20 percent of the 2,000 people who call the hot line each
month.
* "The behavior that really irks people
is when someone has an RV in the driveway, a brand-new car and a
flat screen TV, and they're going into foreclosure because of
poor consumer choices," Urban said. "But this bill is not going
to be a whole lot of help to people who do not have a life vest
and an anchor on each of their feet." However, other people are
facing losing their homes because the value of their house has
been greatly depressed by the large number of distressed homes
in their neighborhood, Urban said.
* "If you wait for the government to bail
you out, you end out on a rooftop in New Orleans," Urban said.
"This bill is not going to be the demarcation line between
foreclosures and no foreclosures. It is going to help reduce
some of the friction, some of the gridlock, for people waiting
on the sidelines to buy properties. It's not going to help
people who made a lot of bad choices or had an overzealous
appetite for properties. I think the bill, from the Fannie and
Freddie sides, will bring some stability to the housing market,
which it needs right now. One thing needs to be clear: No lender
in his or her right mind is going to be lending right now to
someone who does not show good quality, underwriting criteria."
Ryan McMaken, of the Colorado Division of
Housing.
* "We're certainly supportive of any
funding for housing counseling. Housing counseling is the only
thing that helps people who are currently in foreclosure. That
is what helps people right now."
Assistance
The housing bill Congress is preparing to
send President Bush would:
* Give the Federal Housing Administration
$300 billion in new lending authority and relax standards to
provide affordable, fixed-rate mortgages to debt-ridden
homeowners. Any losses would be covered by an affordable housing
fund financed by Fannie Mae and Freddie Mac, the
government-sponsored companies that finance mortgages.
* Give the Treasury Department temporary
authority to lend money to Fannie and Freddie or buy their stock
to avert a collapse of one or both of the mortgage giants. The
authority expires on Dec. 31, 2009.
* Create a new regulator and tighten
controls on Fannie and Freddie, including power for the
regulator to approve pay packages for company executives. Create
a new affordable housing fund drawn from their profits.
Permanently raise the limit on the loans they may buy - set to
revert to $417,000 by the end of the year - to $625,000 in the
highest-cost areas. Allow them to buy loans 15 percent higher
than the median home price in certain cities.
* Provide $3.9 billion in grants to the
hardest-hit communities for buying and fixing up foreclosed
property.
* Modernize the FHA and allow it to back
loans for riskier borrowers. Permanently increase the size of
loans the agency may insure - currently set to revert to
$362,790 by the end of the year - to $625,000 in the
highest-cost areas. The agency could buy loans 15 percent higher
than the median home price in certain cities.
* Bar the FHA from insuring mortgages in
which the borrower's down payment is paid by the seller,
beginning Oct. 1, 2008.
Place a one-year moratorium to bar the
agency from charging premiums based on the riskiness of the
homeowner, until Oct. 1, 2009.
* Provide $15 billion in housing tax
breaks, including for low-income housing. Give a credit of up to
$7,500 for first-time home buyers who purchase residences
between April 9, 2008, and July 1, 2009. Allows people who don't
itemize their taxes to claim a $500-$1,000 deduction on their
2008 property taxes.
* Give states an additional $11 billion
in tax-free municipal bond authority for low-interest loans to
first-time home buyers, construction of low-income rental
housing and refinancing subprime mortgages.
* Offer protection from investor lawsuits
for mortgage holders that modify loans to borrowers who are in
default or about to default.
* Provide $180 million for
pre-foreclosure counseling and legal services for distressed
borrowers.