- The Washington Times - Wednesday, September 19, 2007


The House yesterday approved a plan to expand federal backing of mortgages in hopes of helping struggling homeowners avoid foreclosure.

The bill, which passed the House, 348-72, would allow the Federal Housing Administration (FHA), which insures mortgages for low- and middle-income borrowers, to back refinanced loans for tens of thousands of borrowers who are delinquent on payments because their adjustable-rate mortgages are resetting to sharply higher rates from low initial “teaser” levels.

The measure, which exceeds limits favored by the Bush administration, is Congress’ first stand-alone bill in response to the mortgage-market tumult of the summer, which occurred with a rising tide of defaults and foreclosures. The Senate last week passed spending legislation that includes $200 million to provide aid to nonprofits and other groups that offer counseling and information to help homeowners avoid foreclosure.

House Republicans sharply objected to a $300 million-a-year fund for grants for affordable rental housing and homeownership assistance for low-income families, which would be financed from FHA revenues — a plan also opposed by the Bush administration. But House Republicans mostly were swept along in the vote for the bill, whose overall thrust they endorsed in the face of the mortgage crisis.

“The American dream is in peril for many families in this country as foreclosures rise and dreams shatter,” Rep. Betty Sutton, Ohio Democrat, a state particularly hard-hit by the default wave, declared in House debate before the vote.

The bad news on foreclosures got worse yesterday. Research firm RealtyTrac Inc. said the number of foreclosure filings reported in the U.S. last month more than doubled from a year ago and jumped 36 percent from July — signaling that more homeowners are unable to make timely payments on their mortgages or sell their homes during the housing slump.

An estimated 2 million to 2.5 million adjustable-rate mortgages are scheduled to “reset” this year and next, jumping from low “teaser” rates for the first two or three years to much steeper rates that could cost borrowers their homes. The wave of resets could crest during the presidential and congressional election campaigns next year.

At the same time, turbulence in financial and credit markets resulting from the mortgage upheaval has cast a shadow over the economy and raised the specter of recession.

Mrs. Sutton called the legislation, which backers say could help an estimated 250,000 families, “a bold step forward on what is going to be a long road to fix this broken system.”

Rep. Barney Frank, Massachusetts Democrat and chairman of the House Financial Services Committee, said he wanted to whisk the measure to the Senate, along with a bill to tighten government oversight of mortgage-finance giants Fannie Mae and Freddie Mac. The administration has insisted such legislation was needed before restraints on the amounts of mortgage securities the two government-sponsored companies are allowed to buy and hold could be eased.

The White House wants to expand the mandate of the Depression-era FHA, part of the Department of Housing and Urban Development, to allow it to insure loans of delinquent borrowers that are refinanced to lower rates.

However, the administration objects to the bill’s increased limit on the size of mortgages the FHA can insure to $500,000 in high-cost areas of the country from the current $362,000.

“The program should remain targeted to traditionally underserved home buyers, such as low- and moderate-income families,” the White House said yesterday.

Overall, the House bill makes crucial and desirable improvements but it raises “a number of significant concerns,” the White House said.

The administration wants the FHA loan limits to be raised to $417,000 in high-cost areas and from $200,000 to $271,000 in lower-cost ones.

Meanwhile yesterday, Mr. Frank’s committee voted to grant new authority to two federal bank regulators to protect consumers against deceptive lending practices, watering down the Federal Reserve’s powers.

The panel approved legislation written by Mr. Frank, who has criticized the Fed for not being aggressive enough in restricting unfair lending. The measure would allow the Federal Deposit Insurance Corp. and the Treasury Department’s Office of the Comptroller of the Currency to write these kinds of consumer-protection rules.

“We felt that regulatory authority that Congress had granted financial regulators wasn’t being used,” Mr. Frank said.

In the Senate, legislation being proposed bySen. Christopher J. Dodd, Connecticut Democrat, chairman of the Senate banking committee, and the panel’s senior Republican, Sen. Richard C. Shelby of Alabama, would raise the limit to $417,000 from $362,000. The committee is expected to vote on the measure today.

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