A massive foreclosure rescue bill cleared a key Senate test Tuesday by an overwhelming margin, with Democrats and Republicans both eager to claim election-year credit for helping hard-pressed homeowners.
The mortgage aid plan would let the Federal Housing Administration back $300 billion in new, cheaper home loans for an estimated 400,000 distressed borrowers who otherwise would be considered too financially risky to qualify for government-insured, fixed-rate loans.
An 83-9 vote put the plan on track for Senate passage as early as today, but President Bush is threatening a veto, and Democrats are fighting each other over key details. Those challenges will probably delay any final deal until mid-July.
The bill advanced as separate reports underscored rising economic anxiety: Consumer confidence slid to its lowest level in more than 16 years, and closely watched indices showed a continuing decline in home values.
At the Capitol, Sen. Chris Dodd, D-Conn., the Banking Committee chairman, said the lending measure “would allow us to begin to put a tourniquet on the hemorrhaging of foreclosures in this country.”
Still, conservative Democrats are concerned about how to pay for the measure, and members of the Congressional Black Caucus call it unacceptable, arguing it doesn't do enough to address the needs of black Americans.
Congressional leaders also are divided on how high to place loan limits that apply to government mortgage insurance and financing. The Senate bill sets those limits at $625,000 while a House-passed version puts them at $730,000 – a crucial difference in high-cost housing markets like California.
Lawmakers have been negotiating behind the scenes with the Bush administration to avert a veto. Dana Perino, the White House spokeswoman, told reporters the Senate measure has “some really good aspects” and Congress is “on the right path.”
Borrowers would be eligible for the housing rescue if their mortgage holders were willing to take a substantial loss and allow them to refinance, and if they could show an ability to make payments on the new loan.
They would ultimately have to share with the government a portion of any profits they made from selling or refinancing their properties.
The bill also would tighten controls and create a new regulator for Fannie Mae and Freddie Mac, the mortgage giants that provide huge amounts of cash flow to the home loan market by buying loans from banks.
It would provide a $14.5 billion array of tax breaks, including a credit of up to $8,000 for first-time homebuyers who buy in the next year. And it would boost low-income tax credits and mortgage revenue bonds. The measure falls $2.4 billion short of covering the costs of those tax items.
Mixing in a controversy involving lawmakers, Republicans and Democrats on the Ethics Committee proposed adding mortgage disclosure requirements for members of Congress to the bill following a flap over reports that Dodd and Sen. Kent Conrad, D-N.D., got preferential home loans from Countrywide Financial, whose shareholders are scheduled to vote on a proposed takeover by Bank of America today.