WASHINGTON – Under pressure from voters to address the nation’s housing crisis, Senate Republicans agreed Tuesday to work with Democrats on a compromise plan to stimulate sagging home sales and help distressed homeowners avoid foreclosure.
The agreement calls for Senate Banking, Housing and Urban Affairs Committee Chairman Christopher Dodd, D-Conn., and the committee’s ranking Republican, Sen. Richard Shelby of Alabama, to lay out a bipartisan substitute today for a Democratic housing bill that is opposed by the Bush administration and was blocked in February by Senate Republicans.
Although the two sides had not agreed on the specifics of a compromise Tuesday, both offered proposals that would strengthen truth-in-lending laws for the mortgage industry, provide counseling to homeowners facing foreclosure and help some borrowers refinance their homes.
The Senate had been scheduled to vote again Tuesday on the existing Democratic bill, and Republican leaders were prepared to block it again. But senators returned from a two-week break marked by the government rescue of a major Wall Street investment bank and growing anxiety over the economy among their constituents, and some Republicans argued that it was time to start working together.
“Unless every member of the Senate was in a cave over the two-week recess, it’s pretty obvious that gas prices and housing crisis are the two most important issues to the American public,” said Sen. Johnny Isakson, R-Ga.
“We don’t want to sit on the sidelines,” said Sen. John Cornyn, R-Texas. The $30 billion rescue of investment bank Bear Stearns by the Federal Reserve Board in mid-March “got everybody’s attention,” he said.
Democratic leaders welcomed the agreement, saying it demonstrates the urgency of the economic difficulties that are forcing nearly 8,000 homeowners into foreclosure every day. And the Senate voted to ratify the deal, voting 94 to 1 to permit a debate on housing legislation. Sen. Jim Bunning, R-Ky., was the lone “no” vote.
It was unclear Tuesday exactly what shape the compromise would take. Democrats are pressing to include the most contentious provision of their bill, to give bankruptcy judges the power to cut interest rates on troubled subprime mortgage loans written in recent years.
Under current law, bankruptcy judges are prohibited from modifying mortgages on a person’s principal residence. President Bush and other Republicans say rewriting the bankruptcy code would prompt lenders to tighten their standards and raise interest rates. Several Republicans said they would continue to oppose the bill unless the bankruptcy provision is removed.
Democrats also hope to keep a proposal to provide $4 billion to communities to buy and redevelop properties in foreclosure. They say the money is needed to prop up neighborhoods hit hard by the housing crisis and prevent home values from spiraling further downward.
There are many areas of agreement between the two parties. Both want to provide up to $10 billion to finance tax-exempt bonds that could be used to refinance distressed subprime mortgages. Both sides want up to $200 million in additional spending for housing counselors to help troubled borrowers at risk of foreclosure.
Democrats and Republicans both want to strengthen truth-in-lending laws to make sure that future borrowers considering adjustable-rate mortgages are told the highest monthly payments required under their loans. And both sides agree that businesses struggling because of the housing downturn, including home builders, deserve tax breaks.