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Senate Approves Housing Package
The administration sent a letter Wednesday to congressional leaders offering support for FHA modernization and additional mortgage revenue bonds. But the White House opposes tax credits for home buyers or grants to cities that would encourage the purchase of foreclosed properties, saying those provisions would place responsible homeowners trying to sell their homes at a disadvantage.
House leaders have vowed to set different priorities for their housing legislation, saying they do not intend to help businesses more than individual families. On Wednesday, the House Ways and Means Committee approved an $11 billion tax package that rejects help for home builders and offers a $7,500 tax credit to first-time home buyers rather than buyers of foreclosed properties.
House leaders plan to pair that package with broader legislation that would authorize the FHA to open its doors wider to borrowers whose loans are in default and to insure an additional $300 billion in refinanced mortgages. Under that proposal, lenders would be encouraged to forgive a portion of the debt on their most troubled loans in exchange for federal mortgage insurance.
Yesterday, Dodd held hearings on that proposal in the Senate Banking Committee. House Financial Services Committee Chairman Barney Frank (D-Mass.) did the same and announced plans to hold a committee vote on his bill April 23. House Speaker Nancy Pelosi (D-Calif.) said she plans to usher that measure quickly to a vote in the full House. "We have got to get something done," Pelosi said. "The message has to be to the markets that whether it is the housing market, consumer market or the stock markets, any piece of this, that Congress will act."
Both Democratic presidential candidates, Sens. Barack Obama (Ill.) and Hillary Rodham Clinton (N.Y.), have endorsed the FHA expansion envisioned by Dodd and Frank. Yesterday, the presumptive Republican nominee, Sen. John McCain (Ariz.), also expressed his support, though he called for a more limited version of the idea. All three were absent for yesterday's Senate vote.
The Bush administration Wednesday said the FHA will begin insuring mortgages for homeowners who miss two or three payments, and encouraging lenders to modify too-expensive loans. But Fratto, the White House spokesman, said the president is unwilling to go further. Key Republicans are reluctant as well.
"I would be very circumspect on big sweeping proposals," said Shelby, the ranking Republican on the Senate Banking Committee. "In our zeal to help those who find themselves in extraordinary financial circumstances, we must be sure we do not do more harm than good."