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Foreclosure rescue to pass Senate; House next

(Agencies)
Updated: 2008-07-11 17:25

WASHINGTON - Struggling homeowners who can't afford their mortgages and banks facing big losses would get government help under a foreclosure rescue that has broad bipartisan support.

Realtor Catherine Schramm replaces a listing line number atop a sign after changing the status to pending in front of a home in Florence, Ky., Tuesday, July 8, 2008. [Agencies]

The plan is headed for Senate passage Friday, but faces a bumpy road, with the House planning a rewrite and the White House threatening a veto without major changes.

With the last procedural hurdles scaled Thursday, the package was on track for resounding approval in the Senate. It has drawn broad support in the Senate, reflecting widespread interest by lawmakers in both parties in sending election-year help to struggling homeowners facing tough economic times.

Related readings:  White House threatens veto of foreclosure rescue  Foreclosure filings in US jump 57%  Home foreclosure rates spiking

The centerpiece of the plan would let the Federal Housing Administration back up to US$300 billion in new loans to give struggling homeowners more affordable, fixed-rate mortgages. It allows lenders who agree to take a substantial loss on the mortgages to reclaim at least some money and avoid a costly foreclosure.

Rep. Barney Frank, D-Mass., the Financial Services Committee chairman and an architect of the bill, said the few but significant revisions House leaders are seeking could be made in as little as one week. Key players are preparing for a week of intense negotiations to resolve differences on Capitol Hill and with the White House, with an eye toward producing a bill President Bush could sign later this month.

The measure includes a long-sought modernization of the FHA and would create a new regulator and tighter controls on Fannie Mae and Freddie Mac, the government-sponsored mortgage giants. It also would provide US$14.5 billion in housing tax breaks, including a credit of up to US$8,000 for first-time home buyers.

Congressional Democrats are divided over important elements of the plan, including limits on loans the FHA may insure and Fannie Mae and Freddie Mac may buy. The Senate measure sets them at US$625,000, while House leaders — including Speaker Nancy Pelosi, D-Calif., — want the cap as high as US$730,000.

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