Congress sends mortgage bailout to Bush
Congress on Saturday passed a landmark mortgage rescue plan that is expected to help hundreds of thousands of struggling homeowners, but Capitol Hill lawmakers remain stalled on how to soften the assault on pocketbooks by skyrocketing energy prices.
The housing bill, which the Senate passed during a rare weekend session by a vote of 72-13, includes a $300 billion program to allow homeowners trapped in subprime loans that they can’t afford to refinance their mortgages at lower rates. It allows participating lenders who agree to take a substantial loss on the mortgages to reclaim at least some money and avoid a costly foreclosure.
The loans, which would be capped at $625,000 and backed by the government, would help an estimated 400,000 homeowners keep their properties.
Senate Majority Leader Harry Reid, Nevada Democrat, said the legislation offered the most sweeping housing industry reforms in decades.
“It addresses the root of the broader economic crisis - record-high foreclosures - by helping Americans keep their homes and keep their home equity,” he said. “This is not a perfect bill, but we can be proud of our achievement here.”
The measure had broad bipartisan support, with 27 Republicans joining 43 Democrats and the Senate’s two independents in supporting the bill. No Democrat joined the 13 Republicans who rejected the measure.
“This legislation is an infusion of confidence the financial markets need desperately,” said Sen. Johnny Isakson, Georgia Republican. “It is an insurance policy that’s good for this economy and good for this country.”
But many conservative Republicans called the measure a government bailout that will be financed on the backs of taxpayers.
“Today, Congress crossed a dangerous line between freedom and socialism,” said Sen. Jim DeMint, South Carolina Republican. “For the first time in our nation’s history, the federal government will take ownership of private mortgages and give local and state governments billions to buy and flip homes.”
The House passed the bill on Wednesday, hours after President Bush withdrew a threatened veto of the measure. Mr. Bush is expected to sign the bill into law Monday.
The president used the veto threat to ensure the bill gave the Treasury Department power to extend a line of credit to Fannie Mae and Freddie Mac - government-sponsored companies that either guarantee or own almost half the nation’s mortgages. Treasury Secretary Henry M. Paulson Jr. said the provision was vital for bolstering investor confidence in the two mortgage giants.
Fannie Mae and Freddie Mac stock prices have plummeted in recent weeks over worries about how they will cope with billions of dollars of losses on mortgage loans. As a compromise for including the Fannie Mae and Freddie Mac protections, Democrats were allowed to keep a $3.9 billion provision to award local governments grants to buy and refurbish foreclosed properties.
The package also calls for the establishment of an independent regulator to oversee Fannie Mae and Freddie Mac, provides first-time homebuyers with $7,500 in tax credits and overhauls the Federal Housing Administration.
Many Senate Republicans were angry that Mr. Reid - - who as majority leader controls the legislative schedule - brought the housing bill to the floor in lieu of Republican proposals to increase domestic oil drilling, which they say would lead to lower gasoline prices at the pump.
As a protest, Republicans on Saturday blocked a Democratic aid package to help low-income residents and seniors pay for heating and cooling costs. The measure failed on a procedural vote of 50-35, with 60 votes needed to proceed with the bill. No Democrats opposed the bill, although Mr. Reid switched his vote to “no” on a procedural move that will allow his party to reintroduce the measure in the future.