House Passes Mortgage Aid Bill

Measure Would Expand FHA's Role In Mortgages And Housing Grants

(AP)  The House on Tuesday approved a plan to expand federal backing of mortgages in hopes of helping struggling U.S. homeowners avoid foreclosure.

The bill, which passed the House, 348-72, would allow the Federal Housing Administration, 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 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 came amid 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, a Democrat from Ohio, a state particularly hard-hit by the default wave, declared in House debate before the vote.

The bad news deepened again on Tuesday. Research firm RealtyTrac Inc. said the number of foreclosure filings reported in the United States last month more than doubled compared with August 2006 and jumped 36 percent from July, a trend signaling that many homeowners are increasingly unable to make timely payments on their mortgages or sell their homes amid 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, and the issue has brought politically charged debate in recent weeks over possible responses by the government.

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 a possible recession.

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, 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 FHA can insure to $500,000 in high-cost areas of the United States 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 in a statement Monday.

Government officials and real-estate industry interests maintain that the FHA, which now backs some 3.7 million loans in the event of default, is hamstrung by existing law. The size of mortgages the agency can insure is often too small to attract borrowers in expensive areas such as California and the Northeast, reducing the FHA'S share of the home-loan market to around 4 percent from 19 percent a decade ago.

Administration officials have said the full impact on the economy of the worst housing slump in 16 years and wildly gyrating financial markets has yet to play out.

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[standlee5]

It''s only been in the past few years that someone earning 50K could buy a $400K house with no downpayment. Or a someone unemployed with no verifiable income buy a house with no money down interest only. What were they thinking.

[pwrslm]

Regulating these loans is as simple as requiring refinancing for these adjustable rate mortgages that are facing forclosure, and it should would bring the payments back to within 15% of the original payments...this would put the weight of expense of the same industry that tries to profit from it, the people who push these types of loans.

The consumers dont need counceling, the lenders need to get smart and insure they make loans responsibly for their shareholders.

[ssm9451]

RE; marymg1~There is no ''middle class'' in the United States of America anymore!! Only the rich and the working poor.

[marymg1]

The government''s plan as outlined to "save" borrowers is not designed to help the struggling, or even middle class, borrower. Read between the lines, it is - again - only for the wealthy who got nabbed by their own with these fraudulent, userous loans.