Housing aid bills face vetoes by president
WASHINGTON (AP) — Strapped homeowners could refinance into government-backed mortgages and states would get money to deal with foreclosed property under Democrats’ housing aid plan.
The measures, slated for votes Thursday, constitute the most significant action Congress has taken to date to address the housing crisis that’s at the center of the nation’s economic woes.
President Bush has threatened to veto both measures, which he says reward lenders and speculators.
Democrats counter that the bills will head off hundreds of thousands of foreclosures, stabilize the shaky housing market, and prevent neighborhood blight.
The centerpiece of their plan is a bill by Rep. Barney Frank, D-Mass., the House Financial Services Committee chairman, to have the Federal Housing Administration relax its standards and back up to $300 billion in more affordable, fixed-rate loans for borrowers currently too financially strapped to qualify.
Those homeowners could refinance into new loans if their lenders agreed to take substantial losses on the original mortgages. Borrowers would have to show they could afford to make payments on the new loans. They would have to share with FHA at least half of their proceeds if they profited from selling or refinancing again.
The plan is projected to help roughly 500,000 borrowers at a cost of $2.7 billion over the next five years.
A separate bill by Rep. Maxine Waters, D-Calif., would send $15 billion in loans and grants to states for the purchase and rehabilitation of foreclosed properties. Proponents say it will prevent blight in neighborhoods plagued by abandoned, foreclosed homes.
But Republican critics argue it rewards lenders and investors who own the property, and could act as an incentive for them to foreclose rather than find ways to help struggling borrowers stay in their homes.
Democrats, seeking Republican support for their housing package, were planning to attach a grab-bag of measures Bush has called for.
Those include legislation to overhaul the FHA, to more tightly regulate government-sponsored mortgage giants Fannie Mae and Freddie Mac, and authority for state and local housing finance agencies to use tax-exempt bonds to refinance distressed subprime mortgages.
The plan is also to include a housing tax credit of up to $7,500 for first-time home-buyers, to be paid back over 15 years. It would permanently raise the limit on the size of loans FHA could insure and Fannie Mae and Freddie Mac could buy to $729,750 in the highest-cost housing markets. Those caps are scheduled to fall at the end of the year, to $362,790 for the FHA, and to $417,000 for Fannie Mae and Freddie Mac.
Published in The Messenger 5.8.08