Housing rescue plan advances in Congress
Published: Thursday, May 1, 2008 at 6:01 a.m.
Last Modified: Wednesday, April 30, 2008 at 11:22 p.m.
WASHINGTON - Democrats turned back a slew of Republican challenges to their housing rescue package Wednesday as they moved toward committee approval of the plan.
Republicans, targeting virtually every element of a measure they characterized as an unfair and risky taxpayer-funded bailout, failed to win adoption of any major changes. A final vote of the Financial Services Committee on the bill is scheduled Thursday, and the House is expected to consider the package next week.
The bill would allow the Federal Housing Administration to back up to $300 billion in new mortgages for distressed homeowners now too financially strapped to qualify for such loans.
The plan by Rep. Barney Frank, D-Mass., the Financial Services Committee chairman, would require that borrowers show they could make payments on refinanced fixed-rate loans, while lenders would have to agree to take losses on the existing mortgages.
On mostly party-line votes, the panel rejected several GOP-proposed changes, including those that would have excluded people with bad credit or histories of missing payments, limited the program to low- and middle-income people, and removed the requirement that lenders accept losses.
Republicans said the changes were needed to ensure that the measure was fair to the vast majority of people who had kept up with their house payments, and wouldn't open the government to undue risk to help borrowers who had fallen behind.
"It's not fair to ask the American taxpayer to insure loans to the riskiest borrowers, who may not be able to pay their mortgages no matter what,'' said J. Gresham Barrett, R-S.C.
His amendment to allow the FHA to reject a borrower solely based on a bad credit score or history of delinquency was rejected 36-33.
The bill is picking up support among some Republicans from areas hardest-hit by the mortgage meltdown, but most Republicans side with the Bush administration, which calls it an overly risky bailout.
The panel rejected a proposal by Rep. Randy Neugebauer, R-Texas, that would have allowed mortgage holders to potentially recover some or all of their losses, rather than letting the FHA share a portion of the proceeds should a homeowner sell or refinance.
Those "who should be getting some opportunity to get some of their money back (are) the lenders,'' Neugebauer said.
His bid was rejected 47-22.
Republicans also failed in their attempts to add penalties on lenders if borrowers default on their refinanced loans - an attempt to discourage mortgage holders from unloading their worst-performing loans on the federal government.
Without it, said Rep. Michele Bachmann, R-Minn., "lenders will cherry-pick only their worst loans and ship them off to a taxpayer-backed never-never land without a second glance.''
Bachmann's amendment failed by a 36-33 vote.
Also turned back, 39-30, was a measure by Rep. Scott Garrett, R-N.J., that would have changed an element of the bill that essentially gives distressed borrowers who refinance an automatic 10 percent equity stake in their home.
"What about the person who has been patiently sitting on the sidelines over the last several years, saving up and waiting for these unsustainable prices to come down and paying rent every month while getting no equity?'' Garrett said. "We are now rewarding someone who undertook an irresponsible loan and bought something they can't afford.''
Although the overall bill is expected to cost between roughly $3 billion and $6 billion, the two parties spent the bulk of Wednesday tussling over how to allocate $210 million for pre-foreclosure counseling.
And $35 million would be earmarked for legal counseling, raising concerns among Republicans and some conservative Democrats that taxpayer money could go to trial lawyers to sue lenders. Still, the panel ultimately endorsed the money unanimously after Democrats added language allowing it to be used for counseling for veterans.
It turned back several attempts by Rep. Tom Price, R-Ga., to remove it or shift all the money instead to veterans' counseling.
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