Relief Measure Passes Key Test Vote in Senate
Wednesday, June 25, 2008
A plan to help thousands of troubled homeowners avoid foreclosure won overwhelming bipartisan support on a key test vote in the Senate yesterday, and supporters predicted that the measure would pass as soon as today.
With fresh reports that house prices have plummeted more than 15 percent over the past year, the Senate voted 83 to 9 to consider authorizing the Federal Housing Administration to help troubled borrowers saddled with rapidly rising mortgage payments refinance into more affordable loans if their bankers agree to forgive a portion of their debt.
That plan is the centerpiece of an ambitious package that also would create an $8,000 tax credit for first-time home buyers, provide $4 billion in emergency assistance to communities hit hard by foreclosures, and strengthen regulation of mortgage giants Fannie Mae and Freddie Mac.
Supporters had hoped to marshal the bill through the Senate yesterday and into negotiations with the House, which has passed a similar measure. But those efforts snagged when Democratic and Republican leaders could not agree on how to handle several proposed amendments, including a GOP proposal to strike the $4 billion in community assistance to purchase and rehabilitate foreclosed properties, which has drawn a veto threat from the White House.
Another amendment would address a controversy involving the bill's chief author, Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.), and Sen. Kent Conrad (D-N.D.), both of whom received favorable mortgages through Countrywide Financial that saved them thousands of dollars. The amendment by the top Republican on the ethics committee, Texas Sen. John Cornyn, and other ethics committee members would require lawmakers to disclose the lender and terms of the mortgages on their residences in annual financial forms starting next year.
Although he voted with Democrats to move the bill forward, Senate Minority Leader Mitch McConnell (R-Ky.) seemed to cast doubt on its fate during a midday news conference. "We think there needs to be some amendments offered," he said. "We ought to wait and see what the bill looks like when we finish it . . . to make a determination of whether it's something good for the country or not."
Dodd and Sen. Richard C. Shelby (Ala.), the top Republican on the Banking Committee, said they were confident the package would win Senate support. "There is nothing that is as important to this country as this bill is at this moment," Dodd said on the Senate floor. He later added: "There is a strong bipartisan desire to complete this housing measure."
The measure marks Washington's most ambitious response to a housing slump more severe than any since the Great Depression. More than 1.2 million homes have fallen into foreclosure, and home prices are plummeting. Yesterday, the Standard & Poor's/Case-Shiller Home Price Index of 20 cities reported that home prices fell 15.3 percent in April versus a year ago, the steepest decline since the index was created eight years ago.
The Senate proposal seeks to halt the slide in home prices through initiatives aimed at preventing foreclosures and stimulating demand in the housing market. For example, the $4 billion in community assistance money could be used to purchase and renovate as many as 120,000 homes, said Andrew Jakabovics of the Center for American Progress. The bill also would authorize states to issue $11 billion in mortgage revenue bonds, which could be used to encourage the purchase of an additional 87,000 low-income units, according a chief author of that provision, Sen. John F. Kerry (D-Mass.).
The new FHA foreclosure prevention program, meanwhile, could help as many as 400,000 troubled borrowers stay in their homes, according to congressional budget analysts. Under the proposal, the FHA would offer to insure new mortgages for even risky borrowers if the holder of the original mortgage would agree to forgive a portion of the debt.
Despite its veto threat, even the White House yesterday signaled support for the measure. Press secretary Dana Perino told reporters that the community assistance money is now the administration's "most significant concern" because it "just helps banks" and "doesn't help the consumers and the people who are trying to stay in the homes." She said the administration also is concerned about a provision that would bar the FHA from charging higher insurance premiums to riskier borrowers, forcing the agency to raise prices for all borrowers.
But "we do think that there are some really good aspects of that Senate bill," Perino said. "And we have been working closely with them to try to change the bill in a way that we think it could be something that the President could sign."
Staff writer Paul Kane contributed to this report.