The U.S. Congress on Tuesday sent President Barack Obama
a housing rescue bill that aims to save 400,000 homeowners from
foreclosure and will spend $2.2 billion on programs to aid the homeless.
Lawmakers have spent weeks trying to hash out a compromise bill to
try to help stem a three-year-long housing crisis that has seen record
defaults and double-digit home price declines.
The measure includes direct aid to those hardest hit by the
housing crisis but also tries to stabilize the broader financial markets.
Washington's rescue program for bank customers - the Federal Deposit
Insurance Corp. - would be expanded so that lenders may access a new
government credit line.
The FDIC has been able to tap the Treasury Department for up to $30
billion since 1991 but that credit line would be permanently increased
to $100 billion and go temporarily higher to $500 billion through the
end of next year.
For consumers, the bill will retool a federal program that
refinances troubled homeowners, inject cash into the largest federal
homeless aid program and let tenants who face eviction because of a
landlord's default serve out the rest of their lease.
Both the U.S. Senate and House of Representatives have passed their
own versions of reform and both chambers gave their final approval on
Democrats wanted the bill to clear Congress on Tuesday so that they may present it to President Barack Obama and boast about a legislative victory before they take a week-long vacation.
All of these provisions are valuable steps against the foreclosure
epidemic, House Majority Leader Steny Hoyer of Maryland said in a
statement. Passing this bill is an important part of our economic
recovery, and I look forward to seeing President Obama sign it.
LEGISLATION TRIMMED DOWN
The legislation's scope has significantly narrowed in recent months as proponents sought to broaden its appeal.
A provision that would have let bankruptcy judges erase some
mortgage debt was scrapped and the bill does not include broader
mortgage lending reform sought by Representative Barney Frank, chairman
of the House Financial Services Committee.
Bank of America, JPMorgan Chase and Wells Fargo & Co led the
effort to strike the bankruptcy provision, which would have let judges
cramdown the amount of an outstanding mortgage loan.
The banks who brought us this crisis in America have resisted this
chance to do something about mortgage foreclosure, Senator Richard
Durbin, an Illinois Democrat, said of the provision that failed in late
Lenders warned that investors would be spooked by the uncertainty of giving bankruptcy judges broad new powers.
By a vote of 300-114, the House approved a measure earlier this
month that would have forced mortgage lenders to retain a 5 percent
stake in home loans they make, securitize and then sell to investors.
That bill, which also includes other consumer protections, is now
orphaned in the Senate and so its prospects are uncertain, though Frank
has said the deepening housing crisis is likely to spur passage.
The health of the housing market and potential success of the Obama
housing rescue plan will dictate what happens from here, said Brian
Gardner, vice president at investment firm Keefe Bruyette & Woods.
Foreclosures in April jumped 32 percent from a year ago with 1 in
every 374 mortgage-holders receiving a notice of default, according to
the real estate data firm RealtyTrac. In March, the value of existing
homes was off 12.5 percent from a year earlier, the National
Association of Realtors said.
The legislation would ease terms under which the Federal Housing
Administration may refinance troubled borrowers so that the program may
assist more households. But only a handful of borrowers have been
reached by the Hope for Homeowners program since it was conceived last
The FHA will claim $1.244 billion of a $700 billion government rescue fund to cover some costs of the program.
Congress authorized that rescue kitty in October and lawmakers have
closely scrutinized the multibillion-dollar investments meant to
stabilize Wall Street.
Officials would have to write tougher new conflict of interest rules
for future rescue programs under one provision of Tuesday's bill.
The legislation would also shield mortgage finance companies from
investor lawsuit if those firms ease monthly payments for troubled