October 25, 2010 6:09 PM
- Text
Senate Passes Foreclosure Rescue Bill
(CBS/AP)
The Senate has passed a massive housing aid package to save hundreds of thousands of homeowners from foreclosure.
Struggling homeowners who can't afford their mortgages and banks facing big losses would get government help under a foreclosure rescue that has broad bipartisan support.
The $300 billion plan was approved on 63-5 vote that reflected broad bipartisan support despite a White House veto threat.
Final action on the legislation is weeks off. The House wants to rewrite some details, and lawmakers are negotiating with the White House in efforts to avoid a veto.
The centerpiece of the plan would let the Federal Housing Administration back up to $300 billion in new loans to give struggling homeowners 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.
Rep. Barney Frank, D-Mass., the Financial Services Committee chairman and an architect of the bill, said the few but significant revisions House leaders are seeking could be made in as little as one week. Key players are preparing for a week of intense negotiations to resolve differences on Capitol Hill and with the White House, with an eye toward producing a bill President Bush could sign later this month.
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 important elements of the plan, including limits on loans the FHA may insure and Fannie Mae and Freddie Mac 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 Mae and Freddie Mac over six months.
Shares of the two government-chartered mortgage financers have taken a beating over the last two days and are currently trading at levels last seen in the early 1990s. If the prices don't recover, the two companies will have difficulty raising more money through stock sales to compensate for their own losses from the housing bust. Investors are afraid their stakes will vanish if the government is forced to rescue the companies along with distressed homeowners.
Another key point of dispute is $3.9 billion in the Senate measure for buying and rehabilitating foreclosed properties. The House's band of conservative "Blue Dog" Democrats oppose the money, arguing that it would swell the deficit unless paired with cuts or tax increases to cover the cost.
But many Democrats, particularly members of the Congressional Black Caucus, are fighting to keep the funding, which they say will help prevent the communities hardest hit by the housing crisis from sliding into blight.
The White House singled out the money in its veto threat, calling it a bailout for lenders who helped cause the mortgage meltdown.
Lawmakers and the Bush administration agree on the central concept behind the measure: allowing the government to backstop new mortgages for struggling homeowners.
To make it more palatable to Republicans, the Senate measure would take responsibility for any losses away from taxpayers and instead cover them by diverting an affordable housing fund drawn from Fannie Mae and Freddie Mac profits.
Struggling homeowners who can't afford their mortgages and banks facing big losses would get government help under a foreclosure rescue that has broad bipartisan support.
The $300 billion plan was approved on 63-5 vote that reflected broad bipartisan support despite a White House veto threat.
Final action on the legislation is weeks off. The House wants to rewrite some details, and lawmakers are negotiating with the White House in efforts to avoid a veto.
The centerpiece of the plan would let the Federal Housing Administration back up to $300 billion in new loans to give struggling homeowners 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.
Rep. Barney Frank, D-Mass., the Financial Services Committee chairman and an architect of the bill, said the few but significant revisions House leaders are seeking could be made in as little as one week. Key players are preparing for a week of intense negotiations to resolve differences on Capitol Hill and with the White House, with an eye toward producing a bill President Bush could sign later this month.
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 important elements of the plan, including limits on loans the FHA may insure and Fannie Mae and Freddie Mac 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 Mae and Freddie Mac over six months.
Shares of the two government-chartered mortgage financers have taken a beating over the last two days and are currently trading at levels last seen in the early 1990s. If the prices don't recover, the two companies will have difficulty raising more money through stock sales to compensate for their own losses from the housing bust. Investors are afraid their stakes will vanish if the government is forced to rescue the companies along with distressed homeowners.
Another key point of dispute is $3.9 billion in the Senate measure for buying and rehabilitating foreclosed properties. The House's band of conservative "Blue Dog" Democrats oppose the money, arguing that it would swell the deficit unless paired with cuts or tax increases to cover the cost.
But many Democrats, particularly members of the Congressional Black Caucus, are fighting to keep the funding, which they say will help prevent the communities hardest hit by the housing crisis from sliding into blight.
The White House singled out the money in its veto threat, calling it a bailout for lenders who helped cause the mortgage meltdown.
Lawmakers and the Bush administration agree on the central concept behind the measure: allowing the government to backstop new mortgages for struggling homeowners.
To make it more palatable to Republicans, the Senate measure would take responsibility for any losses away from taxpayers and instead cover them by diverting an affordable housing fund drawn from Fannie Mae and Freddie Mac profits.
Latest Now in MoneyWatch
- Ohio unemployment hits 3-year-low
- Jill on Money: Retirement investing, allocation, long term care
- Could "web-lining" be dangerous?
- Insurers respond cautiously to contraceptive plan
- Judge: Legally, breastfeeding not related to pregnancy
- Budget deficit drops to $27 billion in January
- Why the Powerball Jackpot is part of my investment strategy
- Is the new VW Beetle diesel worth the money?
- Consumer sentiment highlights risks to recovery
- Valentine blues? 10 best cities to be single
- December trade deficit widens to $48.8 billion
- Alcatel-Lucent returns to profit in 2011
- 6 things never to say in a performance review
- $26B mortgage deal: Who gets the money?
- Friendly's CEO steps down
- Quarterly loss hits $3.3B at Postal Service
- Greeks rail against cuts as EU demands more
Latest CBS News Headlines
on Facebook Most Discussed Stories
on CBS News
- USAID contractor case renews debate on tactics
- Peru: Rebel leader found badly wounded
- W.H. official: Contraceptive rule stands
- Whitney Houston: Music was in her blood
on Facebook Most Discussed Stories
on CBS News
