WASHINGTON
Rescue legislation sailed through the House yesterday in an effort to help 400,000 homeowners avoid foreclosure and shore up mortgage companies Fannie Mae and Freddie Mac.
The 272-152 vote reflected a congressional push to send election-year help to struggling borrowers and to reassure financial markets about the health of two pillars of the mortgage market.
Hours before the vote, President Bush dropped his opposition to the bill, which now is on track to pass the Senate and become law within days.
The White House swallowed its distaste for $3.9 billion in grants for blighted neighborhoods. In return, the administration got the power to throw Fannie Mae and Freddie Mac a lifeline and the legislation that Republicans have long advocated to rein in the government-sponsored mortgage companies.
Treasury Secretary Henry M. Paulson and legislators in both parties negotiated the final deal. It accomplishes several Democratic priorities, including aid for homeowners, a permanent affordable-housing fund paid for by the two mortgage companies and the money for hard-hit neighborhoods. The grants are for buying and fixing foreclosed properties.
"It is the product of a very significant set of compromises," said Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee.
Paulson said he would push for enactment of the bill by week's end. Despite disappointment that some items were rejected, he said that "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."
Bush had said that the neighborhood grants would benefit bankers and lenders. But the White House said that a showdown with Congress over the proposal would be ill-timed.
It was a striking split for Bush and many congressional Republicans. GOP leaders said they would not be stampeded into supporting a bill that they called a bailout for irresponsible homeowners and unscrupulous lenders, even as they acknowledged that 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 House minority leader. Only 45 Republicans, most from districts ravaged by the housing crisis and some facing tough re-election fights, voted for it.
Liz Glenn, a community-planning official in Baltimore County, Md., said that the grants "would enable us to acquire and rehab more homes and offer them at an affordable price."
The Treasury Department would gain power to extend the government-sponsored mortgage companies an unlimited line of credit and to buy an unspecified amount of their stock, if necessary.
Fannie Mae and Freddie Mac, chartered by Congress, back or own $5 trillion in mortgages -- nearly half the nation's total.
Sen. Richard C. Shelby of Alabama, the top Republican on the Senate Banking, Housing and Urban Affairs Committee, said that Bush's turnabout reflected political reality.
"They looked at the Hill, they counted some votes and they see there's pretty broad support for this," he said.
But conservatives led by Sen. Jim DeMint, R-S.C., were threatening to slow the bill unless Democrats allowed a vote on barring Fannie Mae and Freddie Mac from lobbying and making campaign contributions. Senators' objections could delay enactment of the bill until next week.
Congressional analysts estimate that a government rescue of the two mortgage companies could cost $25 billion, but they said that there is a better than even chance it will not be needed.
The bill would let the Federal Housing Administration back $300 billion in new loans so that an estimated 400,000 homeowners who cannot afford their house payments could try to escape foreclosure by refinancing into safer, more affordable mortgages.
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