Senator To Widen Housing Proposal
Saturday, April 5, 2008
The chairman of the Senate Banking Committee, reacting to criticism that a bipartisan housing bill would do little for homeowners facing foreclosure, vowed yesterday to move quickly on broader legislation to help troubled borrowers get cheaper mortgages backed by public funds.
Sen. Christopher J. Dodd (D-Conn.) said he will hold hearings next week on the measure, which is aimed at assisting distressed borrowers, particularly those who owe banks more than their homes are worth because of plummeting prices -- an issue at the heart of the nation's housing crisis. Under the proposal, the Federal Housing Administration would encourage lenders to forgive a portion of the loans and issue new, more affordable mortgages in exchange for the federal government's financial backing.
In the House, Financial Services Committee Chairman Barney Frank (D-Mass.) will hold hearings next week on a similar measure. He and Dodd said they hope to bring the matter to a vote in their respective chambers by the end of May.
In a conference call with reporters, Dodd said he "tried desperately" this week to persuade Senate Republicans to support the FHA proposal as part of a bipartisan agreement to address the mortgage meltdown . But Republicans declined to include the complex measure in the hastily drafted housing bill being debated in the Senate.
That measure would provide tax breaks for homeowners and home buyers, more money for foreclosure counseling, and $4 billion in grants so cities can buy foreclosed properties. But most of the money in the bill -- $25.5 billion through 2010 -- would be the in form of tax rebates to the slumping home-building industry and other businesses that are losing money, a fact that has drawn fire from some economists and consumer groups.
Yesterday, Dodd acknowledged that he had reservations about the business-tax breaks. "I would have been more moderate on that, to put it mildly," he said.
But he defended the overall housing bill, saying it contains some "very good provisions" and has broken the political impasse that had prevented lawmakers from addressing the problems driving the nation toward recession.
"Let me remind you, this is the first time we've gotten anything done. So it's a little frustrating when I hear people say you didn't get as much as you'd like," Dodd said. "Would I have liked more in this bill? You bet. But a month ago, we couldn't even debate a bill."
Yesterday, the Senate voted to expand the bipartisan housing bill, agreeing to add tax breaks for struggling Rust Belt manufacturers and for Gulf Coast residents who have received grants to rebuild homes destroyed by Hurricane Katrina. A long line of senators has formed to offer other provisions, including a temporary tax break for first-time home buyers, a plan to let people who are late with mortgage payments take money penalty-free from their retirement accounts, and a proposal to overhaul the oversight of Fannie Mae and Freddie Mac, government-chartered companies that buy up mortgages.
Senate leaders expect to wrap up work on that bill early next week. Then it would move to the House, where its fate is far from certain.
Frank said the House is likely to concur with the portion of the housing bill that would streamline the FHA, one of the top priorities of the Bush administration. That proposal would increase the size of the loans the FHA can insure, to $550,000 in the nation's most expensive housing markets. The economic stimulus bill recently signed by the president temporarily raised the limit to $729,750 from $362,790. The FHA provision in the housing bill is separate from the proposal by Dodd and Frank to permit the FHA to underwrite risky mortgages.
The House is also likely to approve of the Senate's plan to authorize an additional $10 billion in tax-exempt mortgage revenue bonds, Frank said. That provision of the housing bill would permit state and local housing-finance agencies to help an additional 80,000 borrowers, including, for the first time, homeowners trying to shed expensive subprime loans.
But Frank said there is "a lot of opposition in the House to the other tax cuts."