WASHINGTON – A massive package of housing legislation that seeks to rescue hundreds of thousands of homeowners in danger of foreclosure while shoring up confidence in struggling mortgage giants Fannie Mae and Freddie Mac cleared a final procedural hurdle in the Senate Thursday and was headed for passage.
After weeks of delay engineered by Republicans opposed to the bill, the Senate voted 84 to 12 to proceed to the final portion of the measure, Washington’s most ambitious response to a foreclosure crisis that has cost 1.5 million families their homes and dragged down the broader economy.
The measure gained added urgency Thursday as Fannie Mae’s and Freddie Mac’s stock prices continued to plummet, prompting talk of a public bailout for the government-chartered companies, which hold or guarantee the vast majority of the nation’s mortgages. Supporters said the housing package would restore investors’ confidence by installing a strong new regulator and by permanently increasing the pool of loans the companies can handle.
The package will go back to the House, which already approved a version of the legislation. House leaders plan to make changes that would require both chambers to vote on the measure again before sending it to the White House. “The hope is we can now talk to the Senate and, as a result, what we send them they can accept,” said House Financial Services Committee Chairman Barney Frank, D-Mass.
The centerpiece of the housing package is a plan to rescue as many as 400,000 families by helping them trade exotic loans with rapidly rising monthly payments for more affordable mortgages backed by the federal government. Under the proposal, the Federal Housing Administration would be authorized to insure up to $300 billion in new loans for families whose lenders agree to write down their debt to no more than 87 percent of their homes’ current, reduced value.
The program would be temporary and would cost about $1.7 billion, assuming about a third of the new loans fail and the FHA were forced to take possession of the properties. The cost would be covered by diverting a small portion of Fannie Mae’s and Freddie Mac’s profits into a new fund that in future years would be used to finance affordable housing.