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Aid plan on homes gets OK in House
FHA would back problem mortgages; Bush veto expected
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Published: May 9, 2008
WASHINGTON
The House passed a major homeowner-rescue plan yesterday to provide cheaper, government-backed mortgages to a half-million debt-ridden borrowers and to help an economy limping along because of the housing crisis.
Defying veto threats from President Bush, the House approved the bill by a vote of 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 yesterday 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 chairman of the House Financial Services Committee. "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 bill is aimed 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 say, because the alternative would be foreclosures, which can involve losses of 50 percent or more.
Supporters say that the package -- which awaits action in the Senate -- will serve as the basis for a bipartisan housing deal that could satisfy both parties' keen appetite for delivering election-year aid to constituents.
But Bush's veto warnings, supported by staunch Republican 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.
Republicans say that the package rewards lenders and irresponsible borrowers at the expense of homeowners and renters who made more prudent choices and are straining to cover their costs in a tough economic climate.
"The vast majority of Americans who find themselves struggling with mortgage payments, struggling with high gas prices, struggling with high food prices are now going to assume responsibility for ill-advised financial decisions and misjudgments of other people," said Rep. Spencer Bachus, R-Ala.
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Thursday's relish stories will appear in the Entertainment section.
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