ON CAPITOL HILL
Housing Accord Puts Builders First
Thursday, April 3, 2008
Senate Democratic and Republican leaders rushing to address the nation's housing crisis reached agreement yesterday on a package that would provide billions of dollars in tax rebates to the slumping home-building industry while offering little to homeowners threatened with foreclosure.
After working through Tuesday night to flesh out a bipartisan agreement, lawmakers unveiled a bill that rejects the most ambitious plans for aiding distressed homeowners, including a Democratic proposal to permit bankruptcy judges to modify the mortgage on a person's primary residence.
Instead, lawmakers settled on a sharply scaled-back array of measures that would provide $4 billion in grants for cities to buy foreclosed properties, temporary tax breaks worth up to $7,000 for home buyers who purchase foreclosed properties, and new tax deductions for almost every American who owns a home. The package, which would cost about $15 billion over the next 10 years, also would jump-start stalled legislation to streamline the Federal Housing Administration, one of the top priorities of the Bush administration.
Families who cannot afford to repay their home loans -- the group at the heart of the mortgage meltdown -- would benefit mainly from $100 million to expand foreclosure counseling services and greater latitude for local housing authorities to use tax-exempt bonds in refinancing subprime loans.
Home builders and other businesses suffering losses in the flagging economy, meanwhile, would get the lion's share of federal spending in the bill: $6 billion in tax rebates.
Senate Majority Leader Harry M. Reid (D-Nev.) lauded the agreement as "a robust package" that is "good news for the American people." But the lead negotiators on the deal, Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) and the panel's ranking Republican, Sen. Richard C. Shelby (Ala.), acknowledged that the legislation does not go as far as either side would like and represents only their first attempt at helping to resolve the nation's housing problems.
"This is not a complete product, obviously," Dodd told reporters. "But it is a major step in the right direction."
Dodd called the package a "confidence-building measure" that sought to identify "common ground" between the two parties, which had until this week been gridlocked on the issue. At a joint news conference, Dodd and Shelby said they would work together in the coming weeks to see if they could reach agreement on broader measures, including a plan to permit the FHA to underwrite $300 billion in new, low-cost mortgages for struggling homeowners.
Still, some economists, local politicians and advocates for borrowers reacted with disappointment. They estimated that 8,000 families per day are sliding into foreclosure and said that without a major new mechanism for renegotiating mortgages, the package announced yesterday is unlikely to help most borrowers struggling to keep their homes.
"It's not clear what good it's really doing," said Dean Baker, co-director of the Center for Economic and Policy Research. "It's a bipartisan effort not to help the right people."
"This is a case of Congress thinking they have to do something, rather than actually doing something that will make a difference," said David C. John, a senior research fellow at the Heritage Foundation.
Last night, Senate aides were still working out details of the package, which is scheduled to be presented today on the chamber's floor. Both parties will then be free to offer amendments, Dodd said. He added that Democrats will almost certainly try to restore the bankruptcy provision, which was the centerpiece of the housing bill they originally proposed in February.