Huge Housing Bill Set to Become Law

Lawmakers rejected Paulson's request to prevent any public aid to the firms from being counted as part of the federal deficit. Instead, the measure would raise the legal debt limit to $10.6 trillion -- an increase of $800 billion -- giving Paulson a large cushion should aid to the firms become necessary. As of yesterday, the national debt stood at $9.5 trillion.

Paulson has said he is unlikely to need the new authority because the firms are financially sound, and congressional budget analysts agree that it is unlikely to be implemented, saying the cost to taxpayers should be less than $25 billion. In a statement, Paulson praised lawmakers for acting quickly on a measure that would "give confidence to markets and will create a strong, independent regulator better able to address the risks these enterprises pose."

Despite the administration's call for speed, only 45 Republicans joined a largely united Democratic caucus to approve the measure in the House, 272 to 152. House Minority Leader John A. Boehner (R-Ohio) said he was "disappointed that the White House has indicated that they'll sign the bill" and urged lawmakers to vote against it, saying the plan would permit private shareholders to reap profits but stick taxpayers with losses.

"That is not responsible," said Rep. Paul D. Ryan (R-Wis.) "We should reform these institutions now. Either privatize them or publicize them."

Sen. Jim DeMint (R-S.C.) vowed to delay passage in the Senate until at least Saturday, saying he wanted to add an amendment that would bar Fannie Mae and Freddie Mac from lobbying Congress if the firms become indebted to the federal government.

In addition to the rescue plan for the mortgage-finance firms, the package includes a plan to rescue more than 400,000 homeowners at risk of foreclosure by helping them trade high-cost loans with rapidly rising monthly payments for more-affordable mortgages backed by the Federal Housing Administration. As home prices fall, many of those borrowers now owe their banks more than their homes are worth and find it impossible either to make their mortgage payments or to sell or refinance their homes.

For those borrowers, the FHA would offer to guarantee new mortgages if lenders agree to forgive a portion of the debt and permit a new loan to be issued for no more than 87 percent of the new, lower value of their properties.

The FHA, as well as Fannie Mae and Freddie Mac, would be given permanent authority to assist borrowers with much larger home loans, as the bill would increase the cap on the size of those loans to $625,000.

First-time home buyers who purchased a house from April 9, 2008, and July 1, 2009, would be eligible for a tax credit worth up to $7,500, though the credit would eventually have to be repaid to the Treasury. Homeowners who do not currently itemize would be able to claim a new property tax deduction of $500 for individuals and $1,000 for families, a provision that would primarily help older homeowners who have paid off their mortgages.

Democrats say the aid to communities to purchase vacant and foreclosed properties would help stabilize urban neighborhoods hit hard by the mortgage crisis; the administration says it would primarily benefit lenders who foreclosed on the properties.