House Democrats bring to the floor today a plan to stanch the home foreclosure crisis with measures that include government-backed mortgage refinancing and money for states to buy derelict homes, but Republicans say the $2.7 billion bill is nothing more than a "bailout scheme."
Democrats bristled at the bailout accusation, saying their bill is tailored narrowly to help families save their primary residences and bars speculators, investment properties and second or third homes from the refinancing assistance.
It requires homeowners in the program to pay a higher insurance fee than with normal loans and pay the Federal Housing Administration (FHA) a share of profit upon sale of the home, they said.
The White House praised measures to reform government lending institutions but senior advisers recommended a veto of a bill that pays states to buy foreclosed properties.
The administration said the grants would "create an additional incentive for more lenders to foreclose rather than attempt a workout with distressed homeowners."
The only Democratic plan embraced by the administration so far has been proposed changes to the FHA and government lending institutions such as Fannie Mae and Freddie Mac.
Rep. Barney Frank, chairman of the Financial Services Committee, said the legislation answers President Bush's call to expand the FHA, to reform the government lending institutions and to aid home buyers with mortgage revenue bonds.
"We've got a package of measures that work with the market, that correct some problems that were within the market, that give incentives to the market," said the Massachusetts Democrat, adding it will be difficult for Republicans to oppose these measure aimed at helping families.
"You can't always get what you want exactly, but this is a very real effort to reach out and find common ground," he said.
The White House last week chastised the Democrat-led Congress for not moving fast enough to address the housing crunch, but it voiced "serious concern" about superfluous provisions in the Democrats' plan that provide scant relief to struggling homeowners.
House Republicans yesterday railed against the plan's provisions, which include a $35 million payout to legal firms and grants for a Hispanic advocacy group.
House Majority Leader Steny H. Hoyer said the bills will "have a very positive effect in terms of making sure that there are dollars available for people, that there are dollars available for localities, to make sure that homes that have been foreclosed are not left vacant [and] we facilitate people being able to stay in their homes and pay their mortgage rates."
"All of that we think is critical to the economy," the Maryland Democrat said.
House Minority Whip Roy Blunt, Missouri Republican, criticized the Democrats' plan for the payments to legal organizations, which he characterized as a payoff for trial lawyers, and for earmarking grant money for the Raza Development Fund, an account linked to the Hispanic advocacy group National Council of La Raza.
"Unfortunately, the legislation advanced by Democratic leadership fails to meet even these basic standards of common sense, even going as far as to include a $15 million earmark for a left-leaning pro-amnesty organization, and a $35 million slush fund for its friends in the trial lawyer bar," he said.
"In short, what we have in front of us today is a bill for lawyers, lenders and La Raza."
House Republicans introduced competing legislation yesterday that would give home buyers a one-time tax credit for 10 percent of the home's purchase price, expand access to discounted loans through the FHA and tighten regulations on Fannie Mae and Freddie Mac.