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Housing aid plan survives key test
Senate on track to pass it; conservative Democrats, Black Caucus not happy
Sen. Chris Dodd, the chairman of the Senate Banking Committee, said that the lending bill "would allow us to begin to put a tourniquet on the hemorrhaging of foreclosures in this country."
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Published: June 25, 2008
WASHINGTON
A big foreclosure-rescue bill cleared a key Senate test yesterday by an overwhelming margin, with Democrats and Republicans both eager to claim election-year credit for helping hard-pressed homeowners.
The mortgage-aid plan would let the Federal Housing Administration back $300 billion in new, cheaper home loans for an estimated 400,000 distressed borrowers who otherwise would be considered too financially risky to qualify for government-insured, fixed-rate loans.
An 83-9 vote put the plan on track for Senate passage as early as today, but President Bush is threatening a veto, and Democrats are fighting each other over key details. Those challenges will probably delay any final deal until mid-July.
The bill advanced as separate reports underscored rising economic anxiety: Consumer confidence slid to its lowest level in more than 16 years, and closely watched indices showed a continuing decline in home values.
At the Capitol, Sen. Chris Dodd, D-Conn., the chairman of the Senate Banking Committee, said that the lending bill "would allow us to begin to put a tourniquet on the hemorrhaging of foreclosures in this country."
"We need to demonstrate to people in this country that have lost an awful lot of faith in almost everything, but certainly in (Congress), that we can get something done, that we can put aside differences and make a difference in their lives," Dodd said.
Still, conservative Democrats known as "Blue Dogs" are concerned about how to pay for the bill, and members of the Congressional Black Caucus call it unacceptable, saying that it does not do enough to meet the needs of black Americans.
Congressional leaders are also divided on how high to place loan limits that apply to government mortgage insurance and financing. The Senate bill sets those limits at $625,000 whereas a House-passed version puts them at $730,000 -- a crucial difference in such high-cost housing markets as California, home to House Speaker Nancy Pelosi.
Legislators have been negotiating behind the scenes with the Bush administration to avert a veto. Dana Perino, the White House spokeswoman, told reporters that the Senate bill has "some really good aspects" and Congress is "on the right path."
"We have been working closely with them to try to change the bill in a way that we think that it could be something that the president could sign," Perino said.
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 if they could show an ability to make payments on the new loan. They would ultimately have to share with the government a portion of any profits they made from selling or refinancing their properties.
The bill would also tighten controls and create a new regulator for Fannie Mae and Freddie Mac, the mortgage companies that provide vast amounts of cash flow to the home-loan market by buying loans from banks.It would provide a $14.5 billion array of tax breaks, including a credit of up to $8,000 for first-time homebuyers who buy in the next year. It would increase low-income tax credits and mortgage revenue bonds. The bill falls $2.4 billion short of covering the costs of those tax items, a sore point for Blue Dogs who oppose initiatives that add to the deficit.
Mixing in a controversy involving legislators, Republicans and Democrats on the ethics committee proposed adding mortgage-disclosure requirements for members of Congress to the bill as a result of a flap over reports that Dodd and Sen. Kent Conrad, D-N.D., were given preferential home loans from Countrywide Financial Corp., a lender at the center of the subprime-mortgage mess. The proposal by John Cornyn of Texas, the senior Republican on the committee, and Sen. Barbara Boxer, D-Calif., the chairwoman, would remove an exception that allows legislators to omit home mortgages from their annual financial disclosures.
On the broader bill, the 42 House members of the Black Caucus said in a letter to Democratic leaders last week that it has "glaring omissions," including affordable-housing money 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.
Some Republicans, however, are still strongly opposed to the legislation, which they describe as a government giveaway for reckless lenders and investors.
"They expect the federal government to turn their backs on responsible lenders and borrowers and renters waiting -- waiting -- to become first-time homeowners, and support those groups that have pushed our housing market into decline with bad loans and bad investments," said Sen. Mike Enzi, R-Wyo. "This bill is a federal government bailout."
The Senate bill would provide $3.9 billion in grants to deal with foreclosed properties -- a House plan would provide $15 billion -- but the White House singled out the money in its veto threat, and Blue Dogs are demanding that the money be offset with cuts elsewhere.
Rep. Barney Frank, D-Mass., the chairman of the financial-services committee, has said he would be willing to jettison the money and add it to a separate bill in the interest of a deal.
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