The Housing Chronicles Blog: Housing rescue bill finally moves forward

Tuesday, June 24, 2008

Housing rescue bill finally moves forward

The Senate has finally agreed to end debate on the housing bill winding its way through Congress and put it up for a vote, meaning that a final aid bill could be passed by mid summer. From a New York Times story (registration required):

A bill aimed at helping hundreds of thousands of homeowners in danger of foreclosure cleared an important test vote in the Senate on Tuesday, raising the prospects for final passage of an aid bill by mid-summer...

Housing legislation still has other obstacles to overcome, notably a veto threat from the White House. Differences between the Senate and the House, which approved a somewhat different housing-rescue bill by 266 to 154 last month, will have to be ironed out. And the senators will have to work out differences among themselves on various amendments to their version.

But the overwhelming vote in the Senate was nevertheless a good omen for those hoping to see passage of an assistance bill, as were reports on Capitol Hill that intensive negotiations are under way between Senate and House architects of housing legislation. There have also been reports that lawmakers are willing to excise or tweak sections most objectionable to President Bush...

The bill would create an affordable housing fund, financed by Fannie Mae and Freddie Mac, the government-sponsored financial institutions that purchase mortgages from lenders. In the first year after final approval of the legislation, the fund would provide about $500 million for the foreclosure-rescue campaign.

Under both the House and Senate plans, lenders could limit their losses from potential foreclosures by agreeing to reduce the principal balances of loans at risk of default. Borrowers, many with expensive adjustable-rate loans, could then apply to refinance with a more stable, 30-year, fixed-rate mortgage insured by the government through the Federal Housing Administration.

Just before the House approved its rescue plan last month, President Bush threatened to veto it, saying it would put taxpayers’ money at risk and “reward speculators and lenders.” And the margin by which the House approved its measure, while substantial, did not reach the two-thirds that would be necessary to override a veto.

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