WASHINGTON, DC - Hundreds of thousands of homeowners could get safe, cheaper loans rather than losing their homes under a massive election-year mortgage rescue that's drawing bipartisan support. The housing aid package, on track for Senate passage as early as Thursday, is far from completed, however, with House leaders planning to rewrite key portions and the White House still threatening a veto.
The centerpiece of the plan would let the Federal Housing Administration back up to $300 billion in new loans to provide struggling homeowners with more affordable, fixed-rate mortgages. It allows lenders who agree to take a substantial loss on the mortgages to reclaim at least some money and avoid a costly foreclosure.
The measure includes a long-sought modernization of the FHA and would create a new regulator and tighter controls on Fannie Mae and Freddie Mac, the government-sponsored mortgage giants. It also would provide $14.5 billion in housing tax breaks, including a credit of up to $8,000 for first-time home buyers.
Congressional Democrats are divided over small but important elements of the plan, including limits on loans the FHA may insure and Fannie and Freddie may buy. The Senate measure sets them at $625,000, while House leaders, including Speaker Nancy Pelosi, D-Calif., want the cap as high as $730,000. House leaders also oppose the immediate effective date of the Senate plan, preferring to phase in the new regulations for Fannie and Freddie over six months.
The House's band of conservative "Blue Dog" Democrats call the $3.9 billion in the Senate measure bill for buying and rehabilitating foreclosed properties a showstopper because they argue it would swell the deficit unless cuts or tax increases were found.
The White House singled out the money in its veto threat, calling it a bailout for lenders who helped cause the mortgage meltdown. But another Democratic faction, the Congressional Black Caucus, is fighting hard to keep the funding, saying it's crucial to preventing blight in communities hit hardest in the housing crisis.
The caucus also objects to the Senate bill's bar on mortgage programs that let sellers cover the borrower's downpayment, something they argue will cut off many African Americans from the opportunity to own a home. The White House wants to do away with seller-funded downpayment assistance programs, which officials say default at high rates, potentially opening the government to huge losses.
Source: AllHeadlineNews.com