WASHINGTON — The House Financial Services Committee pushed forward on Thursday with an aggressive effort to help troubled homeowners, approving legislation that would make up to $300 billion in federally insured loans available to refinance the mortgages of borrowers in danger of foreclosure.
With passage of the House bill virtually assured, debate over how best to address the downturn in housing shifts back to the Senate, where Democrats drafting a similar plan are struggling to overcome the reservations, if not outright opposition, of a more robust Republican minority.
President Bush has called on Congress to pass very specific legislation to update the operations of the Federal Housing Administration, to tighten regulation of the government-sponsored financiers Fannie Mae and Freddie Mac and to let state and local housing authorities use tax-exempt bonds to refinance bad loans. But he opposes the more expansive legislation pursued by Democrats.
The Financial Services Committee approved the bill 46 to 21, with 10 Republicans joining the Democrats in favor of it.
Representative Barney Frank, Democrat of Massachusetts and the chief author of the housing legislation, said Thursday that he hoped President Bush would sign the bill if it reached the White House as part of a wider package and it contained the legislation that Mr. Bush had demanded.
The Democrats’ legislation seeks to help homeowners by requiring lenders to reduce the principal balances for borrowers at risk of default. The bad loans, typically with high adjustable rates, would be refinanced into more affordable 30-year fixed-rate loans insured by the F.H.A.
The new loans would be limited to no more than 90 percent of a property’s value, based on an updated appraisal. The government would retain a stake in any future sale of the property, worth 3 percent of the initial loan balance or 50 percent of net profit from a sale, whichever is greater.
Borrowers would have to demonstrate the ability to repay the new loan, and if they default, they will forfeit the property. Democrats say the plan could help as many as 1.5 million homeowners.
The Bush administration calls that goal unrealistic and says achieving it would require loosening underwriting rules that would put taxpayer money at too much risk. But the administration’s own effort to help troubled borrowers, called F.H.A. Secure, has so far aided only about 2,000 homeowners who were clearly behind in repaying their loans.
In an interview, Mr. Frank said that Republicans, including the president, understood that the government-sponsored lenders were playing an increasingly vital role in the stability of the economy and that they were now anxious to tighten regulation.
“Don’t underestimate the importance” of changes affecting Fannie Mae and Freddie Mac, he said.
As for the Senate, Mr. Frank said: “I am not going to guess.”
Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the banking committee, had been hoping to complete work next Tuesday on a bill that would incorporate the broad expansion of federally insured loans sought by Democrats with a Senate version of the legislation sought by the Bush administration. But aides said a committee vote would be delayed to at least Thursday or perhaps the following week.
In a statement on Thursday, Mr. Dodd said he hoped to reach a deal, even as some Senate Republicans said they remained uncertain.
“Our top priority right now should be helping people keep their homes,” Mr. Dodd said, praising the House committee’s vote. “This is another step in the right direction.”
He added: “I am committed to working on bipartisan legislation with my colleagues in the Senate banking committee to reduce foreclosures and restore liquidity to the mortgage market.”
A spokesman for Senator Richard C. Shelby of Alabama, the senior Republican on the banking committee, declined to comment.
Republican support for the Democrats’ plan has waned in recent days. Senator Mel Martinez, Republican of Florida and a member of the banking committee, who had previously advocated aggressive government action to stem foreclosures, this week said that he supported the more measured response favored by President Bush. Florida is one of the states hit hardest by foreclosures.
May 2, 2008 at 5:05 am
[...] Mortgage Meltdown: Practical Solutions from Congress!! WASHINGTON — The House Financial Services Committee pushed forward on Thursday with an aggressive effort to help troubled homeowners, approving legislation that would make up to $300 billion in federally insured loans available to … [...]
May 2, 2008 at 6:32 am
[...] Mortgage Meltdown: Practical Solutions from Congress!! Today we have a bill pending that stops the meltdown. It is a courageous and creative step that protects all parties. It requires YOUR input, so pass this along to as many other people as you can. This is much more than a step in the right direction. It would be nice to see support from the presidential contenders as well. Write your congressmen and women and get this thing passed. The Senate and House are standing on the line between mayhem and an orderly society and have taken the right st [...]
May 22, 2008 at 12:40 am
It is not fair to help people who have taken advantage of the system and now they just are declaring foreclosure. What about us who made a responsible decision, and because we are not making enough money, we are close to go in the same road? I am fighting hard to keep my house, but it is frustrating when the government says that it would be helping only whoever is in risk of loosing their homes. Does this mean that I have to do the same, so I can get help? The problem for many of us is that no matter that we want to keep our houses, they just do not worth as much as when we, confident in the market and the government controls, paid when we first purchased them.
The solution is not giving that release to some people because their irresponsibility, the solution is to giving the margin back to all families from what the houses were worth, when they were purchased, and the current value. This money, about 35 % of the original value is what we should have not to pay because the lack of controls in the government. Please consider this, otherwise, there is not future for those that want to be real and fear and see how those that have not been are going to be helped, rather than to be punished. What amazing more after all this ridicules proposal is that in top of this, houses are been taxes at the value of the market of 2006 and the collapse happened in 2007; this is about 40 % above the price that people would pay for the same house today. Finally, yet importantly, the state exemptions, WHAT A JOKE! They have never been adjusted and they are completely out of context in this whole issue. Would somebody take serious actions for this crisis? I am myself just thinking to let it go and just go back to rent. Finally, what was mine once it is not mine anymore.