A $300 billion mortgage rescue bill that appeared ready for Senate passage stalled Thursday as a lone Republican senator held up the bill amid concerns it’s tantamount to a massive federal bailout.
The Senate on Thursday morning voted 84-12 to clear the last procedural hurdle in the chamber, potentially setting up a vote on final passage later in the day.
But Sen. Jim DeMint, South Carolina Republican, blocked the measure, which he says would unfairly reward unscrupulous lenders.
“This is a $300 billion bailout for bad lenders that forces American taxpayers to foot the bill,” said DeMint spokesman Wesley Denton.
Democratic and Republican leaders were trying to work out a deal with Mr. DeMint on Thursday to allow the bill to move forward.
“Ninety-nine senators like [the bill], and DeMint’s holding it up,” said Sen. Majority Leader Harry Reid, Nevada Democrat. “I question the entire Republican caucus for not doing something about it. I think it’s wrong.”
The bill, which also faces some opposition in the House, would allow struggling homeowners to refinance their mortgages at lower rates through the Federal Housing Administration (FHA). It allows lenders who agree to take a substantial loss on the mortgages to reclaim at least some money and avoid a costly foreclosure.
Democrats who drafted the bill say it could help at least 400,000 families keep their homes.
The package also would provide first-time home buyers with up to $8,000 in tax credits.
The measure’s overall bipartisan support reflects an election-year urgency in Congress to pass reforms designed to help homeowners struggling to pay their mortgages and would-be home buyers who can’t afford to enter the market.
“We can’t afford delay,” said Sen. Charles E. Schumer, New York Democrat. “There have been I believe a 100,000 new [mortgage] foreclosures from the time we brought this bill up [last month] until today. Every day we wait the economy sinks lower and lower - both on the housing end and on the financial end relating to the mortgages.”
While the bill is expected to clear the Senate on Friday or early next week, it’s uncertain how it will fare in the House, as many Republicans and some Democrats on both sides of their party’s ideological spectrum have concerns.
The House’s conservative Democratic “Blue Dog” coalition say they will oppose a provision in the Senate measures for $4 billion in state grants for rehabilitating foreclosed properties unless the cost is offset by cuts or tax increases.
Democrats in both chambers also disagree on the size of the loans the FHA may insure. The Senate measure sets them at $625,000, while House leaders - including Speaker Nancy Pelosi, California Democrat - want the cap as high as $730,000.
But Mr. Schumer said he expects differences between the House and Senate versions to be hammer out quickly.
“It’s not solved yet, but the paths to solving it are pretty clear,” he said.
The White House has threatened to veto the measure because it says the government-backed loans would amount to an unfair subsidy for lenders that helped cause the mortgage crisis.
The measure also calls for the establishment of an independent regulator to oversee Fannie Mae and Freddie Mac, the government-sponsored companies that finance mortgages.
And the bill would create a trust fund, financed by annual contributions from Fannie Mae and Freddie Mac, to be used for the construction of affordable rental housing.
cThis article is based in part on wire service reports.