House passes mortgage measure

The House today approved the Democrats’ plan to stanch home foreclosures with government-backed mortgage deals and buyouts of derelict homes, ignoring a Bush administration threat to veto what critics dub a bailout scheme.

The package of legislation passed in near party-line votes after heated debate in which Democrats accused opponents of mean-spirited disregard for struggling families and Republicans decried the bill for saddling taxpayers with other people’s errant debts.

The votes fell short of a veto-proof majority, and the legislation faces an uncertain fate in the Senate.

Rep. David Wu, Oregon Democrat, compared Republicans to the skinflint banker Mr. Potter character in Frank Capra’s 1946 film “It’s a Wonderful Life,” who coldly advocated evicting poor families with children because they were not his children.

“What I’m hearing from the other side is, ’They are not my children. They are irresponsible. Throw them out,’ ” Mr. Wu told the chamber.

Rep. Judy Biggert, Illinois Republican, said taxpayers should not pay the price for borrowers who lied about their incomes on mortgage applications or scam artists that inflated appraisals for real-estate flipping schemes.

“Nor should they pay for irresponsible homeowners who chose to live beyond their means, using inflated home-equity loans to buy a new plasma TV, a swimming pool or fancy car,” Mrs. Biggert said during floor debate. “It’s not fair to those who saved and invested responsibly.”

The legislation expands the Federal Housing Administration (FHA) program to make more at-risk homeowners eligible for lower-cost government-insured mortgages. The government would underwrite about $300 billion worth of real-estate debt at an estimated cost to taxpayers of about $2.7 billion.

Democrats argued that the plan does not bail out greedy lenders or irresponsible borrowers because participants in the program must take a 15 percent loss on the loan principal and pay the FHA a share of profits from resale.

Another provision doles out $15 billion in federal loans and grants to states to buy foreclosed homes standing empty and to rehabilitate abandoned property.

The loan and grant program is a major sticking point for White House officials, who view it as an incentive for banks to opt for foreclosures knowing government-backed buyers are waiting in the wings.

Rep. Spencer Bachus of Alabama, ranking Republican on the Financial Services Committee, said the vast majority of Americans who pay their mortgages on time, have paid off their home loans or rent housing, were being forced to bankroll the Democrats’ bailout.

“They are being drug in and are on the hook for these bad loans,” he said.

Rep. Barney Frank, chairman of the Financial Services Committee and a lead sponsor of the bills, said a laissez-faire approach would sacrifice families caught in the housing crunch.

“The market got us into this. We don’t say junk the market,” the Massachusetts Democrat said. “We have a responsibility to do [something] in a way that is pro-market and minimizes the outlay.”

House Majority Leader Steny H. Hoyer, Maryland Democrat, said the $2.7 billion price tag for the mortgage-refinancing plan was equal to what the United States spends every few days fighting in Iraq.

He chided Republicans for claiming to be the family-values party. “What can be more family friendly than keeping families in their homes?” he said.

“Make no mistake, the slumping housing market has had a negative rippling effect throughout our economy,” Mr. Hoyer said. “It is imperative that we take responsible, reasonable steps such as this to strengthen our weakening economy.”

A Republican amendment to nix the loan program died in a near party-line 219-190 vote.