Democratic and Republican senators, in a rare show of bipartisan cooperation, reached a tentative agreement yesterday on a measure to help ease the housing foreclosure crisis.
The compromise ends weeks of bickering on how to help millions of homeowners with subprime mortgages who face rising interest rates and the threat of losing their homes.
The proposal, scheduled to reach the Senate floor today for debate, includes provisions to reform and expand the Federal Housing Administration’s (FHA) loan program, $4 billion in grants for local governments to buy foreclosed homes, $100 million for foreclosure counseling programs. It offers tax relief for some mortgage holders.
It also calls for assistance to military personnel returning from overseas duty who face foreclosure.
“Today’s compromise is a good example of what can be achieved when we put playpen politics aside and focus on finding solutions,” said Sen. Lamar Alexander, Tennessee Republican and chairman of the Senate Republican Conference.
But the final measure could be altered significantly, as the compromise will allow each party to offer several amendments.
“This is not a complete project — a lot needs to be done in the coming weeks and months as we work with our federal agencies, the administration, our colleagues in both the House and Senate,” said Senate banking panel Chairman Christopher J. Dodd, Connecticut Democrat, who helped draft the deal. “But it is a major step in the right direction.”
Democrats say they will offer an amendment to include a controversial measure to give 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.
“When the government can bail out Bear Stearns — a company that made a fortune in bad mortgages — it can surely ease the strains of ordinary American homeowners who aren’t as sophisticated as a Wall Street firm, and help them keep their biggest asset,” said Wade Henderson, president of the Leadership Conference on Civil Rights.
The House meanwhile is working on its own measure designed to stabilize the troubled housing market by offering at-risk mortgage holders government-backed, refinanced loans.
The proposal would expand the FHA’S loan program to provide up to $300 billion to insure and guarantee refinanced mortgages with lower interest rates.
House Financial Services Committee Chairman Barney Frank, Massachusetts Democrat, who drafted the legislation, said the measure potentially could refinance up to 2 million loans that would allow “families [to] stay in their homes, protect neighborhoods and help stabilize the housing market.”
But House Republican leaders warn that too much government could worsen the housing crisis.
“Congress specifically and the government generally is better at over-reaction than appropriate reaction,” said House Minority Whip Roy Blunt, Missouri Republican. “Our [House Republican] members do have some concern, appropriately so, that we not do anything that needlessly makes the home mortgage market difficult for people who should be able to quality for a mortgage in the future.
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