Senate passes controversial foreclosure relief measure

WASHINGTON – The Senate passed legislation Thursday aimed at addressing the nation’s housing crisis – setting the stage for thorny negotiations with the House, where Democrats are pushing a more sweeping measure tilted toward aiding borrowers at risk of losing their homes.

The measure was overwhelmingly approved, a sign of Congress’ election-year anxiety over the wave of foreclosures and falling home prices that have contributed to the economic downturn.

But the bill has drawn widespread criticism. Consumer groups complain it doesn’t do enough to aid distressed homeowners. The White House has been unenthusiastic. And Democratic presidential candidates Sens. Barack Obama and Hillary Rodham Clinton expressed disappointment that the bill was lopsided in providing tax breaks to the home-building industry.

Although Senate Democrats said the Foreclosure Prevention Act was the best they could pass in a narrowly divided chamber, fellow Democrats in the House are working on their own version of a rescue plan.

“Quite candidly, what we have done does not quite live up to the title,” said Sen. Christopher J. Dodd, D-Conn., chairman of the Senate Banking Committee. “We do some things but not enough.”

But he pledged that more relief measures would follow.

The Senate bill would provide tax breaks to home builders and buyers of foreclosed properties. It would provide $4 billion for local governments to buy and fix up abandoned properties, a provision that is intended to prevent neighborhood blight but has been assailed by the White House as a bailout for lenders and speculators.

The Senate measure also includes a number of provisions that enjoy support on both sides of the Capitol and are likely to end up in any final bill that emerges from House-Senate negotiations.

These include state authority to issue an additional $10.9 billion in tax-exempt bonds to refinance subprime mortgages and provide mortgages for first-time home buyers, providing $180 million for counselors to help borrowers avoid foreclosure, increasing the length of time a lender must wait before beginning foreclosure proceedings on a home owned by returning war veterans and permanently raising the amount of the maximum mortgage that can be backed by the Federal Housing Administration.

House leaders are working on a measure that would provide up to $300 billion in federal guarantees to refinance troubled mortgages and $11 billion in tax breaks to stimulate the housing market and help homeowners avoid foreclosure. The House is also considering an interest-free loan of up to $7,500 for a first-time home buyer.

Although its bill is less ambitious than the House version, the Senate’s 84-12 approval of the Foreclosure Prevention Act was a sharp turnabout from a few weeks ago. At that time, lawmakers were mired in partisan gridlock over how Congress should intervene in the housing crisis, if at all, to stem the rising tide of foreclosures.

But the Federal Reserve’s rescue of Wall Street investment bank Bear Stearns Cos. last month created a new sense of urgency among lawmakers from both parties to show they were doing something to respond to the housing crisis.