The Senate yesterday easily passed tax breaks for homeowners and businesses facing foreclosure, the first of many proposals to address the housing crisis that lawmakers are considering.
The bipartisan bill, which has been criticized for doing more to help mortgage lenders and home builders than struggling families, is expected to be merged with more homeowner-friendly measures in the House. It passed by a vote of 84-12.
The Senate bill provides a $7,000 tax credit to people buying foreclosed homes, $4 billion in grants for local governments to buy foreclosed property and more than $150 million for foreclosure counseling programs.
“It’s a good beginning,” said Senate banking committee Chairman Christopher J. Dodd, Connecticut Democrat, who sponsored the measure. “We’ll come back at the appropriate time and try to move [a broader bill] within the next few weeks.”
The Bush administration opposed the bill, saying it would “do more harm than good” by depressing some home values. It also opposes using taxpayer money to bail out lenders saddled with inventories of foreclosed properties.
The measure includes about $25 billion in tax breaks for money-losing businesses such as home builders, a provision opposed by many House members, and seeks to reform and expand the Federal Housing Administration’s (FHA) loan program, which typically carries lower interest rates. The provision would allow the FHA to secure loans up to $550,000, up from the current limit of $362,000.
But Capitol Hill Republicans led by Sen. Richard C. Shelby of Alabama, the ranking Republican on the banking committee, reached a compromise with Democrats after weeks of partisan bickering on how to jump-start the slumping housing market and help those facing foreclosure.
“This housing bill is yet another example of what the Senate can accomplish when we work together,” said Sen. Lamar Alexander of Tennessee, chairman of the Senate Republican Conference.
The Senate bill likely would be paired with other housing measures proposed in both houses of Congress, including a plan introduced last month by the House Financial Services Committee that would expand the FHA loan program to provide up to $300 billion to insure and guarantee refinanced mortgages with lower interest rates.
Committee Chairman Barney Frank, Massachusetts Democrat, who drafted the House plan, said the measure potentially could refinance up to 2 million loans.
Mr. Dodd also has proposed a separate plan that would insure up to $400 billion in loans.
The White House on Tuesday announced its own FHA reform package that would allow about 100,000 homeowners who face foreclosure to refinance their mortgages. Democratic leaders on Capitol Hill said the plan would do too little to address the millions of Americans who risk losing their homes through foreclosure.
“The president’s initiative affects 100,000 people when it should be affected 10 to 15 times that,” said House Speaker Nancy Pelosi, California Democrat.
The measure also provides a standard property tax deduction for taxpayers who do not itemize on their returns, and $10 billion in bond authority for subprime loan refinancing — a provision backed by the administration. And it would extend from two years to four years a tax provision that allows corporations to apply current losses to previous profits and receive applicable tax refunds.
An unrelated $6 billion tax break for renewable energy producers was added to the bill yesterday.
Senators last week rejected a proposed amendment that would have given bankruptcy judges power to cut interest rates and principal on troubled mortgages. The proposal was a key sticking point in a failed Democratic effort in February to expand protections for homeowners facing foreclosure. Republicans said allowing bankruptcy judges to rewrite the terms of a mortgage would tighten credit and raise interest rates.
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