Homeowner Rescue Plan Passed By House

Bush Threatens To Veto The $300 B Plan That Would Provide Cheaper Mortgages To Americans Facing Foreclosure

(AP)  The House on Thursday passed a massive homeowner rescue plan to provide cheaper, government-backed mortgages to half a million debt-ridden borrowers and bolster an economy crippled by the housing crisis.

Defying veto threats from President Bush, the House approved the measure by a vote of 266-154, with 39 Republicans - mostly from areas suffering worst from housing woes - supporting it.

It would let the Federal Housing Administration take on up to $300 billion in new mortgages so that financially strapped borrowers facing foreclosure could refinance.

The plan by Rep. Barney Frank, D-Mass., is the centerpiece of a broader package of bills approved Thursday that Democrats say will prevent more foreclosures and help homeowners and communities deal with the fallout from the mortgage meltdown.

"We are in a recession, and the major cause of that is the subprime crisis," said Frank, the House Financial Services Committee chairman. "Diminishing the number of foreclosures is in the interest not simply of those who will avoid foreclosure, but people in their neighborhood, (in) the cities in which they are located, and the whole economy."

The measure is targeted at homeowners facing default, including many who owe more than their houses are worth.

For instance, a homeowner who owes $290,000 on a house now worth $225,000 could refinance into an FHA-backed loan if the mortgage holder was willing to take a loss of about 36 percent. The borrower's monthly mortgage payments would fall from $2,200 to about $1,200.

Loan holders would have an incentive to participate, proponents believe, since the alternative would be costly foreclosures, which can involve losses of 50 percent or more.

Supporters hope the package - which awaits action in the Senate - will serve as the basis for a broad bipartisan housing compromise that could satisfy both parties' keen appetite for delivering election-year aid to anxious constituents.


But Bush's veto warnings, bolstered by staunch GOP opposition, are clouding its prospects.

"House Democrats passed bills that they know will never become law. Most Americans understand that we shouldn't create a taxpayer-funded bailout for lenders and speculators," said Tony Fratto, a White House spokesman.

Republicans argued the package reward lenders and irresponsible borrowers at the expense of homeowners and renters who made more prudent choices and are straining to cover their costs in a punishing economic climate.

"The vast majority of Americans who find themselves struggling with mortgage payments, struggling with high gas prices, struggling with high food crises are now going to assume responsibility for ill-advised financial decisions and misjudgments of other people," said Rep. Spencer Bachus, R-Ala.

Under Frank's plan, homeowners currently considered too risky to qualify could refinance into FHA-backed loans if their lenders agreed to take substantial losses on the original mortgages. Borrowers would have to show they could afford to make payments on the new loans. They would have to share with FHA at least half of their proceeds if they profited from selling or refinancing again.

The plan is projected to cost $2.7 billion over the next five years.

Republican backers said they were putting aside their philosophical objections to a government-based rescue due to the severity of the housing crisis that has hit their constituents.

"There are 500,000 real families with children out there who are going to be helped by this," said Ric Keller, R-Fla. "It may not be a perfect bill, but good people in my home state of Florida need help, and in my view, this is the only train leaving the station."

Indeed, with a legislative schedule squeezed by the November elections, Congress has just a couple of months to come to terms with the White House on a housing package. Sen. Christopher J. Dodd, D-Conn., the Banking Committee chairman, has been searching for an elusive bipartisan deal on a similar measure, which he hopes his panel can vote on next week.

The House on Thursday also passed, 239-188 a bill to send $15 billion to states to buy and fix up foreclosed property. Bush has also threatened to veto that measure, contending it rewards the very lenders who helped caused the housing chaos and could act as an incentive for them to foreclose rather than find ways to help struggling borrowers stay in their homes.

Proponents say it will prevent blight in neighborhoods plagued by abandoned, foreclosed homes.

Democrats, seeking Republican broad support for Frank's housing plan, also added a grab-bag of measures Bush has sought.

Those included legislation to overhaul the FHA, to more tightly regulate government-sponsored mortgage giants Fannie Mae and Freddie Mac, and authority for state and local housing finance agencies to use tax-exempt bonds to refinance distressed subprime mortgages.

They also attached a housing tax credit of up to $7,500 for first-time home-buyers, to be paid back over 15 years.

The package permanently raises the limit on the size of loans FHA could insure and Fannie Mae and Freddie Mac could buy to $729,750 in the highest-cost housing markets. Those caps are scheduled to fall at the end of the year, to $362,790 for the FHA, and to $417,000 for Fannie Mae and Freddie Mac.

[lewiston14]

Vet chill will ya. We know about Bush and his band of merry men and there is NOTHING we can do except wait it out.

Barb interesting post. I bet we could we could spend an entire day at Starbucks talking about what your feeling and thoughts really are. It was a short post that im sure has alot more thoughts in it.

[mcvet]

The mortgage deregulation gave some an opportunity that they may not have had but others fell by the wayside. Even if they had a fixed rate most were way over their heads and bought on speculation thinking they''''d make a bundle selling in a few years. This is a lot of drama about people who would probably be moving in and out of rental units or public housing anyway.


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Posted by standlee5 at 02:27 PM : May 09, 2008
+ report abuse

You gotta love a Nazi when they are in that "Blame other people for our failures" mode. If you notice this swastika hugger NEVER mentions the actions of the Fascist Republican''s that made all this a reality... NO! Can''t even think about putting blame on the "Party". Instead blame those who took tax credits and fell for the snake oil salesmen, who were DEREGULATED and ALLOWED to sell their snake oil by..... The "PARTY". Yeah got it!! SIEG HEIL BUSH!!

[barbaraf4]

A century or so ago, most businesses owned their own property. Then came industrialization and more and more businesses ended up leasing their office space, then leasing their production space, and today the majority of them do not own their own property. And nobody really thinks anything unusual about it.
~~~~~~~~~~~~~~~~~
This is because it never makes sense for business to tie up equity in real estate.

[lewiston14]

If I may some counter points. First people are saying we have a do nothing congress. What is the point if every they do is at the mercy of Bush%u2019s VETO pen. Might as well do nothing for his remaining term because unless its benefits himself or his rich buddies it is not going anywhere. Yes people were stupid and banks were stupid but there are the three basics of loosing a house. A medical issue, Loss of a job (outsourced and don%u2019t believe the unemployment rate is only 5 percent) and divorce. The banks wont deal so as they keep writing off billions every month the closed houses keep falling in price as the number of houses on the market will keep going up. Soon you should be able to buy a small house for the price of a car as these houses for lack of care will start falling apart and in colder climates the bank will have pay to heat each one them. You can not have a strong economy if all the jobs go to China India and Mexico. NAFTA did deliver on what they said it would create jobs everyplace else but here. That was a crock of bull.

[tmittelstaed]

We were lucky, we bought in in the mid 90''s, right before the runup on home prices. When I review our finances now, our equity more than covers what we have lost in interest we have paid, and we are about 1/3 the way through a 30-year fixed. But, I can see now already that unless we really start agressively prepaying and get the mortgage retired before it''s due, that what we will continue to pay in interest will be greater than what we can reasonably expect our house to be worth by the time the 30 year loan was complete. And today, with the surplus of foreclosed homes, and homes that banks are sitting on, if we were young and just starting out, buying a home would be very foolish. We would be much better off just permanently renting and letting whoever owned the home we were renting pay the difference between what the mortgage payments were, and what the rental market supports.

[tmittelstaed]

This bailout is aimed at a paradigm that the country is outgrowing. For anyone stuck with no job in a depressed city, who is upside down on a mortgage, well you might as well allow the forclosure or declare bankruptcy right now, so you can move to someplace that you can work. How does a government bailout help you? There''s still no jobs where you live.
A home and property it sits on is just a thing. It''s only use to you is to house your private life in a location that you have employment. And for most people, whether you have continued employment in that location is mainly due to forces way beyond your control. If your job disappears, that home now does not help you, it holds you back
And, as far as buying a home as a retirement savings, that is for most people a terrible investment - over the years you will pay 4-5 times the amount of interest than principal, and unless your home appreciation covers that lost interest, guess what, you just lost money. You would have been better off renting at 75% of what your mortgage was, and taking the remaining 25% and sticking it in an IRA.

[tmittelstaed]

A century or so ago, most businesses owned their own property. Then came industrialization and more and more businesses ended up leasing their office space, then leasing their production space, and today the majority of them do not own their own property. And nobody really thinks anything unusual about it.
We are starting to see the same thing happen with private home ownership. Years ago the American dream was to own your own home. But, was owning your own home really the actual dream or was it more symbolic? Do most people really own their own homes today when they have a mortgage? Not really.
Think about it. Private home ownership really only makes sense in a period of population growth. The reason being is that during population growth there''s always a housing shortage, so when you need to sell your home and move, you can always do so quickly, and be free of it.
But, unlimited population growth isn''t a sustainable model for the Earth. The country eventually will become like China and population will be steady. Then what happens when home builders continue to build homes, and condo builders continue to build condos? Oversupply, and in a surplus market, prices fall. Now what happens when you want to move across country and take that better job you just found? You can''t.

[barbaraf4]

What I see as part of this problem is that most people see homeownership as a "right" not a privilege.

If you can qualify for and afford to make your monthly mortgage payment (on time), afford your property taxes, afford your property insurance, and afford utilities on the property, then you have the "right" to own the property. If the answer is "no" to any of these requirements, then you do not have the "right" to own the property. Simple.

Right now I am madder than h*e*l*l that they are talking $7,500 tax credits to first time home buyers. Those are my tax dollars and I would not choose to spend them that way. This is just more incentive to get people into homes who might not otherwise be able to afford them.

If we are giving away tax dollars, let''s reward those of us who are current on our mortgage.

[prbradley]

For those interested in ''other than who deserves or who does not''...there is presently a FHASecure Program (HUD''s Federal Housing Administration..FHA)(800 651 1696) since, at least August 2007, indicating help (refi) to distressed qualified homeowners. The down side... is there is apparently no help if the homeowner is MORE than two months into late payments. If over two months late, homeowner must re-instate MTG and re-apply in 1 year. In my experience trying to work out something or anything with the Mortgagor (actually the servicing enity) they state unequivically they will NOT CHANGE (lower) the interest rate. The programs they MAY offer simply shift all overdue pmts + accumulated fees, legal & others to the end of the loan. They do indicate the possibility of "up coming ARMS (adjustable rates)" could be removed ? So I guess what I suggest is stay in contact with the 1st & 2nd (if you have one), and see what comes with your effort. We have only a 140,000. total 1st and 2nd. Small home but we thought it was ours to work on until unemployment!
Hope some of this may help someone. This info has been hard to come by. Good Luck

[standlee5]

The mortgage deregulation gave some an opportunity that they may not have had but others fell by the wayside. Even if they had a fixed rate most were way over their heads and bought on speculation thinking they''d make a bundle selling in a few years. This is a lot of drama about people who would probably be moving in and out of rental units or public housing anyway.

[garnet08]

And we all sympathize with you. But this does not entitle you or anyone who was truly irresponsible to use taxpayer money to bail you out.

Posted by brianp55 at 12:14 PM : May 09, 2008

You and whoever feels this way is NUTS AND HEARTLESS AND I HOPE THIS HAPPENS TO YOU SOMEDAY BECAUSE I WOULD LOVE TO CALL YOU IRRESPONSIBLE! WE BAIL OUT EVERYONE ELSE!

[standlee5]

Why would anybody want to "save" a house they can''t afford. They could walk away and rent for half the price. This is NOT going to help people unless the govt. decides they''re going to buy the house and GIVE it to the people then they probably wouldn''t be able to afford the property taxes anyway. RENT people it''s a better deal.

[lochlan-2009]

"Anybody can get approved for a housing loan for more than they can afford or at least more than will allow them to live within their means."

That was true over these last several deregulated years. Of course, the places where foreclosures are the worst are cities, where they preyed on the uneducated by selling them "the dream". These people were meant to lose their house during the foreclosure crisis. The foreclosure business was suppose to be very, very lucrative beginning last summer through next summer. The $2.9billion this bill will cost tax payers to save half a million Americans their home is the equivelant of 14.5 days of war in Iraq.

[dragonmouse-2009]

I still don''t get it. Anybody can get approved for a housing loan for more than they can afford or at least more than will allow them to live within their means. You''ve got to shop for a price range that''s feasible and FIXED. It doesn''t take a rocket scientist to figure this one out. You need to read your fine print...if you think you deserve a 200-500K house...then you need to read and UNDERSTAND what you''re getting into. If you don''t then you need to find an outside party you trust to explain it. If you don''t take these steps then you''re stuck with learning a very solid lesson about life.

People losing their homes because of changes in employment status, environmental tragedy (Katrina, etc) or an severe illness...is DIFFERENT from "stupidity".

It seems like banks could negotiate a FIXED interest rate close to what they signed for. If they still can''t afford or qualify for that...then they lose the house. There is no law about getting a second or even a THIRD job to get out of debt.

[lochlan-2009]

For pete''''s sake, adjust. Figure out where you can afford to live, and live there.

Your telling these people to adjust to inflation that is through the ceiling. How do you expect a retiree who had a fixed income and bought their house thirty years ago to expect oil, gas, electricity, food, insurance, health care, etc., etc. to rise 300-400% over the last few years. Add to this the employed whose job was sent to Chindia. Your house may have been small, but you''d be singing a different song if it was your cottage (and life savings) being taken through government and corporate corruption and deregulation. The bottom 98% of this country have been taken for a ride by the biggest crooks to hit D.C. since Nixon.

[minnick8-2009]

It would also be nice if developers would build housing units that families could actually afford to buy.

[minnick8-2009]

locklan

Maybe next time they finance, they will hire an attorney to read the fine print to them.

[minnick8-2009]

lochlan

I grew up in a pioneer house. I am glad we did have running water; we often did not have electricity. My first house that I bought with my husband, I lost when he left me and I couldn''t afford payments. I do have a hard time feeling sorry for families losing 3/4 million dollar houses. For pete''s sake, adjust. Figure out where you can afford to live, and live there.

[standlee5]

The alternative may have been worse. stagflation, recession, enemployment. Most don''t remember that these scenarios are devastating.

[ricknuber]

Can someone please explain to me how Bush and his cronies have upheld the "family values" mantle Republicans are always crowing about?

More American families are under the poverty line, less can afford health insurance, more need to have both parents working to make ends meet (even though Americans are working more hours and being more productive with those hours than any other developed nation), and fewer can afford college.