- The Washington Times - Thursday, March 5, 2009

The White House and Congress on Wednesday both offered a lifeline to struggling homeowners facing crushing mortgage bills, but there were still questions over whether the banking industry would sign on to the mission.

The Treasury Department released the details of a $75 billion program President Obama outlined last month designed to help up to 9 million homeowners refinance their loans or cut their current payment by modifying existing loans.

With economists pointing to the imploding housing market as a key to overall economic recovery, “It is imperative that we continue to move with speed to help make housing more affordable and help arrest the damaging spiral,” said Treasury Secretary Timothy F. Geithner.

On Capitol Hill, the House Rules Committee took just five minutes to whistle through language for a revised mortgage relief bill, which includes a so-called “cramdown” provision to allow bankruptcy judges to modify the terms of a home mortgage.

House Majority Leader Steny H. Hoyer, Maryland Democrat, said the House could begin debate on the bill Thursday.

The House’s Democratic leadership delayed consideration of the bill last week after conservative and pro-business members of the party’s caucus objected to the original language. After first rejecting any changes, Speaker Nancy Pelosi agreed to modify the bill to increase the burden on borrowers to show they tried to work out a solution with their banker before resorting to bankruptcy protection.

The minirevolt was one of the first signs of the new Congress that Mrs. Pelosi could face policy challenges from centrist and fiscally conservative Democrats. The mortgage cramdown provision faces an uncertain fate in the Senate.

Even with the changes, major financial lobbies remained opposed to the House bill, arguing it would end up making mortgages more expensive as lenders raise rates to cover the added risk of losses from bankruptcy.

“The bill makes bankruptcy a first choice and not a last resort,” said Financial Services Roundtable President Steve Bartlett. “It will undermine ongoing efforts to modify loans.”

Supporters of the bill say fears of a wave of bankruptcy filings are overblown. They also argue that bankruptcy judges already have the right to modify the terms of other loans, including ones for second homes.

The House bill includes measures to increase participation in the Hope for Homeowners refinancing program and a provision permanently raising the federal deposit insurance protection level to $250,000 per account.

Mr. Obama’s “Making Home Affordable” program is playing to better reviews among private lenders, with both JPMorgan Chase and Wells Fargo Home Mortgage - two of the country’s biggest home lenders - endorsing the plan.

Under the Obama plan, up to 4 million homeowners would be eligible to modify the terms of existing home loans if they are unable to meet current payments. Another 5 million homeowners would be allowed to refinance high-interest mortgages to more affordable fixed-rate loans, some with interest rates as low as 2 percent for the first five years.

The program, first announced in mid-February, is aimed at reducing monthly mortgage payments to no more than 31 percent of a borrower’s gross monthly income. Modifications would only apply to loans made before Jan. 1, with a value of less than $729,750.

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