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THE $300B GOVERNMENT RESCUE IS ON ITS WAY!!!

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Real Estate Agent with Resolution Realty

Housing rescue plan passes key Senate test

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A massive foreclosure rescue bill cleared a key Senate test Tuesday by an overwhelming margin, with Democrats and Republicans both eager to claim election-year credit for helping hard-pressed homeowners.

The mortgage aid plan would let the Federal Housing Administration back $300 billion in new, cheaper home loans for an estimated 400,000 distressed borrowers who otherwise would be considered too financially risky to qualify for government-insured, fixed-rate loans.

An 83-9 vote put the plan on track for Senate passage as early as Wednesday, but President Bush is threatening a veto, and Democrats are fighting each other over key details. Those challenges will probably delay any final deal until mid-July.

The bill advanced as separate reports underscored rising economic anxiety: Consumer confidence slid to its lowest level in more than 16 years, and closely watched indices showed a continuing decline in home values.

At the Capitol, Sen. Christopher J. Dodd, D-Conn., the Banking Committee chairman, said the lending measure "would allow us to begin to put a tourniquet on the hemorrhaging of foreclosures in this country."

"We need to demonstrate to people in this country that have lost an awful lot of faith in almost everything, but certainly in (Congress), that we can get something done, that we can put aside differences and make a difference in their lives," Dodd said.

Still, conservative Democrats known as "Blue Dogs" are concerned about how to pay for the measure, and members of the Congressional Black Caucus call it unacceptable, arguing it doesn't do enough to address the needs of black Americans.

Congressional leaders also are divided on how high to place loan limits that apply to government mortgage insurance and financing. The Senate bill sets those limits at $625,000 while a House-passed version puts them at $730,000 - a crucial difference in high-cost housing markets like California, home to House Speaker Nancy Pelosi.

Lawmakers have been negotiating behind the scenes with the Bush administration to avert a veto. Dana Perino, the White House spokeswoman, told reporters the Senate measure has "some really good aspects" and Congress is "on the right path."

"We have been working closely with them to try to change the bill in a way that we think that it could be something that the president could sign," Perino said.

Borrowers would be eligible for the housing rescue if their mortgage holders were willing to take a substantial loss and allow them to refinance, and if they could show an ability to make payments on the new loan. They would ultimately have to share with the government a portion of any profits they made from selling or refinancing their properties.

The bill also would tighten controls and create a new regulator for Fannie Mae (FNM) and Freddie Mac (FRE), the mortgage giants that provide huge amounts of cash flow to the home loan market by buying loans from banks.

It would provide a $14.5 billion array of tax breaks, including a credit of up to $8,000 for first-time homebuyers who buy in the next year. And it would boost low-income tax credits and mortgage revenue bonds. The measure falls $2.4 billion short of covering the costs of those tax items, a sort point for Blue Dogs who oppose initiatives that add to the deficit.

Mixing in a controversy involving lawmakers, Republicans and Democrats on the Ethics Committee proposed adding mortgage disclosure requirements for members of Congress to the bill following a flap over reports that Dodd and Sen. Kent Conrad, D-N.D., got preferential home loans from Countrywide Financial Corp. (CFC), a lender at the center of the subprime mortgage mess. The proposal by John Cornyn of Texas, the senior Republican on the committee, and Barbara Boxer, D-Calif., the chairman, would remove an exception that currently allows lawmakers to omit home mortgages from their annual financial disclosures.

On the broader bill, the 42 House members of the Black Caucus said in a letter to Democratic leaders last week that it has "glaring omissions," including affordable housing funds for states affected by Hurricane Katrina and grants for states and localities to buy and fix up foreclosed properties.

To draw GOP support, Senate Democrats diverted the affordable housing money to pay for the foreclosure aid program.

Some Republicans, however, are still vehemently opposed to the legislation, which they describe as a government giveaway for reckless lenders and investors.

"They expect the federal government to turn their backs on responsible lenders and borrowers and renters waiting - waiting - to become first-time homeowners, and support those groups that have pushed our housing market into decline with bad loans and bad investments," said Sen. Mike Enzi, R-Wyo. "This bill is a federal government bailout."

The Senate bill would provide $3.9 billion in grants to deal with foreclosed properties - a House plan would provide $15 billion - but the White House singled out the funds in its veto threat, and Blue Dogs are demanding that the money be offset with cuts elsewhere.

Rep. Barney Frank, D-Mass., the Financial Services Committee chairman, has said he'd be willing to jettison the money and add it to a separate measure in the interest of a deal.

 

Comments (10)

Pam Pugmire
Silvercreek Realty Group - Meridian, ID
Meridian Idaho Real Estate

I would normally would be on the side of not bailing out irresponsible borrowers, but unless I'm totally misunderstanding this, the government already did bail out Bear Stearns which is a high yeild/high risk fund.  From things I've heard there was probably some bail out for Country Wide.  So if the government is going to bail out the banks, they should bail out the borrowers too!!!  This mess wasn't caused by borrowers alone! 

Is that a fair assesment, or am I not getting it?

Jun 24, 2008 05:56 PM
Yvette Smith
LONG & FOSTER - Williamsburg, VA
Realtor In Williamsburg VA, Homes for Sale

Steve, Now this sounds like a stimulus!

Jun 24, 2008 11:15 PM
Steve Harless
Resolution Realty - Las Vegas, NV

pam: you are right...well written comment. thanks for stopping by

Jun 25, 2008 02:50 AM
Steve Harless
Resolution Realty - Las Vegas, NV

CAN YOU SAY TAX INCREASE?

Jun 25, 2008 02:59 AM
Jim Crawford
Long & Foster - Fredericksburg, VA
Jim Crawford Broker Associate Fredericksburg VA

Oh, Sen. Christopher J. Dodd, D-Conn the one that got the loan from Countrywide Mortgage?  Did anyone cry indict the scoundrel and yell "Conflict of interest" and paying for this with US Taxpayers money?

Jun 25, 2008 03:01 AM
Steve Harless
Resolution Realty - Las Vegas, NV

Jim: no they didnt yell conflict of interest...none of the politicians are held accountable...people are too busy trying to stay afloat from the housing and gas crunch. its a challenging time we live in

Jun 25, 2008 03:04 AM
Eve Marie Hyatt
Keller Williams Cedar Park-Leander - Cedar Park, TX

Last I checked, banks were unwilling to work with borrowers who have been timely with their mortgage payments, so how is this bill going to change their hard line stance with borroweres heading towards foreclosure?  Our government couldn't orchestrate a 1 car funeral, and we're to believe they'll fix this mess?!!! Keep government out, and let the market correct itself.

Jun 25, 2008 03:12 AM
Steve Harless
Resolution Realty - Las Vegas, NV

I hear ya Eve! There should be an overhaul in our banking systems, Don't you think? If bankers had to act with the same code realtors had to, if would help the public tremendously.

Jun 25, 2008 03:18 AM
Karen Luke
South Metro Property Management, LLC - McDonough, GA
Henry County Real Estate

Steve, I just don't get how this going to help.

  • increase the risk on government backed loans
  • make FHA less healthy
  • oh, and we tell FHA you've got to keep on approving people with down payment assistance. Never mind that those borrowers account for over half of FHA defaults
  • declare FHA the saving grace for all of us because hardly anyone can get a conventional loan anymore

This bill sounds like an egg basket. We are taking a basket, with a few holes already in it , punching a few more holes in it, then putting ALL of our eggs in the basket. Should we even bother to pray that the basket holds the eggs.

We deserve a downturn in the economy. We elected these people.

Jun 25, 2008 07:36 AM
Steve Harless
Resolution Realty - Las Vegas, NV

Karen: I highly recommend tar & feathers for all of them for the mess we are in

Jun 25, 2008 12:00 PM