A $15 billion housing bill was pushed through a House committee Wednesday by Democrats. Republicans objected to the bill, calling it a government bailout for lenders and speculators and expressing fears that it could lead to even more foreclosures.
"The measure would send federal loans and grants to cities and counties hit hardest by the housing crisis so they could buy and fix up foreclosed properties. It passed the Financial Services Committee 38-26, mostly along party lines," according to the Associated Press.
Only three Republicans backed the plan. Two of them are from Ohio, a state that has been hit hard by the foreclosure crisis. Ohio had the sixth highest foreclosure rate in the nation in 2007, according to RealtyTrac, at 1.8 percent.
The $15 billion, half in loans and half in grants, would be provided to states with high foreclosure rates to be distributed among the most populous cities with the highest foreclosure rates, and to small towns that have suffered from foreclosures. Low- and middle-income neighborhoods and those who have already lost homes to foreclosure would be given priority.
The money could be used by government-run entities and not-for-profit organizations for purchasing, rehabbing, reselling or renting housing.
The $15 billion bill "could become ensnared in a broader partisan dispute over whether to provide another economic rescue package on the heels of the tax rebate plan President Bush signed in February," according to the AP.
"Committee Chairman Barney Frank, (D., Mass.), said that provisions of the bill, including a requirement that purchased homes be at least 60 days into the foreclosure process, would prevent abuse. More importantly, he said, lawmakers need to do more to help local governments dealing with eroding tax bases and maintaining foreclosed homes," according to the Wall Street Journal.
"Democrats contend a 'second stimulus'—including such items as housing assistance, a jobless benefits extension, and food and heating aid for the poor—is needed. But Bush and congressional Republicans are loath to embrace more spending," according to the AP.
The rest of the Democrats' housing overhaul plan is expected to meet with less resistance than the $15 billion bill. At the heart of the Democrats' plan is letting hundreds of thousands of struggling homeowners refinance their current mortgages into "more affordable, government-insured loans," according to the AP.
This element is a proposal by Frank "to expand the Federal Housing Administration to help financially strapped homeowners who otherwise wouldn't qualify for government-backed loans refinance into cheaper fixed-rate mortgages," according to the AP.
The FHA would take on a maximum of $300 billion in new mortgages for borrowers facing financial strain, but who could prove that they could afford a new mortgage, according to Frank's proposal. "Lenders would first have to agree to take substantial losses on the existing loans so the homeowners could refinance," according to the AP.
Lenders will benefit, however, from another bill passed Wednesday by the panel, which will "provide legal protection in certain circumstances for mortgage servicers that work with borrowers facing foreclosure," according to the Wall Street Journal.
"The bipartisan measure by Reps. Michael N. Castle, R-Del., and Paul E. Kanjorski, D-Pa., would shield mortgage holders from legal liability if they took a loss to allow a borrower to refinance. It's designed to address a fear among those who bundle mortgages into securities that investors will sue them if they modify the loans," according to the AP.
