Housing Accord Puts Builders First

That bill was strongly opposed by the White House and other Republicans, who argued that permitting judges to modify mortgages would cause lenders to tighten their standards and raise interest rates. At the time, many Republicans were reluctant to pursue any intervention in the housing market, and Senate Republicans last month blocked the initial Democratic bill.

Days after lawmakers left Washington for a two-week break, however, the Federal Reserve Board stepped in to prevent the collapse of a major Wall Street investment bank, Bear Stearns. That prompted Democrats to accuse the White House and other Republicans of helping Wall Street while ignoring Main Street. When lawmakers returned to the Capitol this week, Senate Republicans and Democrats agreed to start talking.

The result was the bill unveiled yesterday, a mixture of Republican and Democratic measures. While they lost the bankruptcy provision, Democrats were able to keep another of their top priorities, $4 billion in Community Development Block Grants to purchase foreclosed homes and help stabilize neighborhoods hit hard by declining home prices.

Democrats also got extra money to help as many as 250,000 families get counseling to avoid foreclosure, though their original plans for $200 million were cut in half. Another $1.7 billion in federal funds would be used to finance $10 billion in tax-exempt bonds for local housing authorities.

The bill also strengthens truth-in-lending laws and lengthens the amount of time a lender must wait before starting to foreclose on the homes of military veterans.

FHA modernization was a top Republican priority. Under the proposal, the FHA would increase its loan limit to $550,000 in the most expensive housing markets, giving more families access to low-cost loans.

Republicans proposed the temporary tax credit for home buyers, which would provide $3,500 a year for two years to buyers who purchase homes in foreclosure. Democrat Max Baucus (Mont.), chairman of the Senate Finance Committee, offered the new property tax deduction, which would save families who do not currently itemize deductions as much as $1,000 on their federal taxes.

Both parties wanted to help home builders and other businesses. Under the agreement, corporations that lose money in 2008 and 2009 would be permitted to apply their losses to tax returns from as far back as 2004, making them eligible, according to a bill summary, to "receive any applicable refunds."