House passes mortgage relief package
WASHINGTON – The House Thursday approved an ambitious plan to rescue hundreds of thousands of homeowners at risk of foreclosure by helping them trade exotic loans with rapidly rising monthly payments for more affordable mortgages backed by the federal government.
Bucking a White House veto threat, 39 Republicans joined Democrats in supporting the bill, the centerpiece of a broader housing package that represents Washington’s most aggressive response to the nation’s housing crisis.
The measure aims to unfreeze mortgage markets by expanding the Federal Housing Administration’s reach of and strengthening mortgage giants Fannie Mae and Freddie Mac. It also would create a $7,500 tax credit for first-time homebuyers to try to boost sales and slow plummeting home prices.
GOP House leaders blasted the bill as a bailout for speculators and irresponsible borrowers. But the measure, sponsored by House Financial Services Committee Chairman Barney Frank, D-Mass., gained strong support from rank-and-file Republicans worried that escalating foreclosures are ruining lives and decimating neighborhoods.
Despite President Bush’s condemnation of the bill earlier this week, White House officials also seemed to leave the door open to negotiation. And in the Senate, key Republicans are working with Democrats on a similar plan.
“People are in a world of hurt. My sense is there’s maneuvering room,” said Rep. Fred Upton, R-Mich., whose state has been among those hardest hit. “There’s still a good chance they’ll get a bill the president can sign, knowing that a lot of the country needs help.”
More than 1.2 million homes are in foreclosure, and an additional 3 million are forecast to join them over the next two years. Home prices have fallen more than 10 percent, and state and local tax collections are suffering. Polls show the economy is the top concern among voters, with one in four saying they have been directly affected by problems in the housing market.
The borrowers most at risk of foreclosure – and who have drawn policymakers’ attention – are those who have fallen behind on their mortgage payments but cannot sell or refinance because the value of their homes has fallen and they owe their banks more than their homes are worth.
The Bush administration has tried to help such borrowers by urging banks to voluntarily reduce their mortgage debt. The administration also has eased eligibility standards so borrowers who have missed a few payments can qualify for cheaper loans insured by the federal government through the FHA. But those initiatives have helped relatively few families.