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Foreclosure Info

07/23/08 By JULIE HIRSCHFELD DAVIS, Associated Press Writer 1 hour, 21 minutes ago

WASHINGTON - Congress is moving quickly to pass a housing package that aims to help 400,000 strapped homeowners avoid foreclosures and prevent Fannie Mae and Freddie Mac from collapsing.

Momentum for passage picked up mightily after President Bush earlier Wednesday dropped his opposition to the bill just hours before a scheduled vote in the House. That put the legislation on track toward enactment as early as the end of the week. Bush's decision to sign the election-year bill came despite his strong resistance to including $3.9 billion in the measure for neighborhoods hit hardest by foreclosures.

The administration and lawmakers in both parties teamed to negotiate the election-year measure, which pairs Democrats' top priorities — federal help for homeowners facing foreclosure and $3.9 billion for devastated neighborhoods — with Republicans' goal of reining in mortgage giants Fannie Mae and Freddie Mac while reassuring financial markets of their stability.

In a policy statement on the bill, the White House said that parts of it "are too important to the stability of our nation's housing market, financial system, and the broader economy not to be enacted immediately."

Bush had objected to the neighborhood grants, which would be for buying and fixing up foreclosed properties, saying that they would help bankers and lenders, not homeowners who are in trouble.

But Dana Perino, the White House press secretary, told reporters in a conference call that a showdown with Congress over the funds would be ill-timed.

It was a striking split for Bush and congressional Republicans, many of whom are angrily opposed to the housing legislation, which they call a handout for irresponsible homeowners and unscrupulous lenders.

At a closed-door meeting Wednesday morning, House Republicans denounced the plan, although it's clear they don't have enough votes to prevent it from becoming law.

Rep. John Boehner, R-Ohio, the minority leader, said he was "deeply disappointed" at Bush's decision to sign the bill.

"We must take responsible steps to ensure our financial and housing markets are sound, but the Democrats' bill represents a multibillion dollar bailout for scam artists and speculative lenders at the expense of American taxpayers," he said in a statement.

The measure hands the Treasury Department the power to extend the government-sponsored mortgage companies an unlimited line of credit and buy an unspecified amount of their stock, if necessary, to prop up Fannie Mae and Freddie Mac, two companies chartered by Congress. The firms back or own $5 trillion in U.S. mortgages — nearly half the nation's total.

With Congress just 10 days away from leaving Washington for a five-week summer break, Perino said, the possibility of waiting until mid-September for the housing measure "is not a risk worth taking in the current environment."

Key senators said they were ready to swiftly approve the measure without any changes.

"We'll be anxious to move this product along," said Sen. Christopher J. Dodd, D-Conn., the Banking Committee chairman.

Sen. Richard C. Shelby of Alabama, the senior Banking Republican who was his party's lead negotiator on the measure, said Bush's turnabout reflected political reality.

"They looked at the Hill, they counted some votes and they see there's pretty broad support for this," Shelby said.

At the Treasury Department, Paulson told reporters that he urged Bush to sign the bill despite its inclusion of the "wasteful" $3.9 billion in grants. He said its enactment would be "a strong message that we are sending to investors" that would play a key role in "helping us turn the corner" on the housing crisis.

Congressional analysts estimate that the mortgage giant rescue could cost $25 billion, but predict there's a better than even chance it won't be needed at all.

The bill would let hundreds of thousands of homeowners trapped in mortgages they can't afford on homes that have plummeted in value escape foreclosure by refinancing into more affordable, fixed-rate loans backed by the Federal Housing Administration. Lenders would have to agree to take a substantial loss on the existing loans, and in return, they would walk away with at least some payoff and avoid the often-costly foreclosure process.

The plan also creates a new regulator with tighter controls for Fannie Mae and Freddie Mac and modernizes the FHA.

It includes about $15 billion in housing tax breaks, including a credit of up to $7,500 for first-time home buyers for people who bought homes between April 9, 2008, and July 1, 2009. It also allows people who don't itemize their taxes to claim a $500-$1,000 deduction on their 2008 property taxes. That chiefly benefits homeowners who have paid off their homes and can't claim a deduction for mortgage interest.

And it increases the statutory limit on the national debt by $800 billion, to $10.6 trillion.

The White House, which initially denounced the FHA rescue as too burdensome on the government and risky for taxpayers, dropped most of its objections to the measure in recent weeks in search of a swift deal. The urgent request by Paulson to throw Fannie Mae and Freddie Mac a federal lifeline acted as a powerful locomotive for a deal.

The bill sets a cap of $625,000 on the loans that Fannie Mae and Freddie Mac may buy and the FHA may insure. It lets them buy and back mortgages up to 15 percent above the median home price in certain areas.

Lawmakers abandoned efforts to place conditions on any Fannie and Freddie rescue, but the bill hands the new regulator approval power over the pay packages of executives at the companies regardless of whether the government moves to financially reinforce them.

It also counts any federal infusion for the mortgage giants under the debt limit, essentially capping how much the government could spend to stabilize the companies without further approval from Congress. As of Tuesday, the national debt that counts toward the limit stood at about $9.5 trillion, roughly $360 billion below the statutory ceiling.