WASHINGTON (AP) — A federal mortgage rescue to help hundreds of thousands of homeowners avoid foreclosure is in limbo, with the Senate about to pass a bill that has no chance of winning House approval.
Democratic divisions over small but significant details are delaying the plan, despite keen interest by lawmakers in both parties to enact election-year help targeted to the housing crisis at the root of voters' anxiety. Complicating the picture is a White House veto threat.
The measure is expected to pass easily as early as Thursday in the Senate, where it consistently has drawn support broad enough to overcome a veto. But then it will head back where it started, to the House, where leaders have made it clear they must rewrite key portions of it before it has any chance of passage.
Odds are still good that Congress and the White House will be able to agree on a broad housing package this summer to address the mortgage meltdown that has spawned huge numbers of foreclosures throughout the country. But first, Democrats have to smooth out their own divisions on the plan.
House leaders are working to make it more palatable to conservative "Blue Dog" Democrats who complain it would swell the deficit, and lawmakers from the highest-cost housing markets, including Speaker Nancy Pelosi, D-Calif.
Some of the changes being considered could sap the GOP support that the housing rescue needs to clear Congress and be signed by President Bush.
The dilemma reflects a tricky dynamic at work on the housing package, the centerpiece of which would have the Federal Housing Administration back $300 billion in new loans to help borrowers buckling under high monthly payments refinance into safer, more affordable fixed-rate mortgages.
The legislation contains several elements Bush has demanded, including long-awaited overhauls of the FHA and Fannie Mae and Freddie Mac, which together provide huge amounts of cash flow to the home loan market by buying loans from banks. But Bush objects to some central parts, particularly $3.9 billion to buy and fix up foreclosed properties.
Democratic leaders have toiled to cut a bipartisan housing deal that Bush could accept, hoping to claim credit for addressing a chief concern among voters. In the process, though, they have had to jettison some top priorities — including affordable housing funds for states affected by Hurricane Katrina and billions of dollars for buying and rehabilitating foreclosed properties in the hardest-hit neighborhoods.
Now their divisions over the package appear to be putting the compromise at risk.
Rep. Barney Frank, D-Mass., the Financial Services Committee chairman who won House approval of his version in May, has made it clear he does not plan to accept the Senate proposal without changes. He still predicts the package could be enacted by the end of the month.
Sen. Christopher J. Dodd, D-Conn., the Banking Committee chairman, is not so sure. He said further changes could cost the bill crucial momentum.
"My hope would have been that this bill we'll send them is something the House could support — that's still my hope," said Dodd, who crafted the bill with Alabama Sen. Richard Shelby, the panel's senior Republican. "We're getting down to the time here where we may not get a bill if this thing goes on much longer."
Pelosi is working to quell a revolt by the Blue Dogs, who insist that housing tax breaks and any spending in the package must be paid for with tax increases or spending cuts to prevent an increase in the deficit.
That means rewriting a $14.5 billion array of housing tax breaks, which falls $2.4 billion of being fully offset.
It's also sparked an intense push by black lawmakers — who wanted far more money for fixing up foreclosed properties — to keep the $3.9 billion in the Senate measure in the face of the opposition from Blue Dogs and the White House.
"We're going to fight on this," said Rep. Maxine Waters, D-Calif., who made an impassioned plea for the funds in a closed-door meeting of House Democrats this week. "It's extremely important that we fight to help the communities that are being devastated in this subprime (mortgage loan) meltdown."
The Congressional Black Caucus also opposes language in the Senate bill that bars the FHA from insuring mortgages obtained by borrowers whose downpayments were paid by the seller.
Bush also is pressing to do away with seller-funded downpayment assistance, a move black leaders say would disproportionately hurt African Americans.
Steve Preston, the secretary of Housing and Urban Development, said mortgages in which the seller pays the downpayment default at rates three times higher than other home loans, exposing FHA to undue risk.
Lawmakers "know our views very strongly," he told reporters Tuesday.
The two sides are also still divided on how high to place the limits on mortgages that the FHA can insure and Fannie and Freddie may buy. The House sets the caps at about $730,000 for the highest-cost housing markets, while the Senate ceiling is $625,000. And they are battling over when the new regulations for Fannie and Freddie can take effect. The Senate would impose them immediately, while Frank and House leaders are pushing for a six-month phase-in, which would leave them to a new president.
Another House vote on the bill could provide more time for lawmakers and the White House to iron out their differences. Frank and other leaders have been in behind-the-scenes talks with Treasury Secretary Henry Paulson in hopes of finding a compromise that could prompt the White House to lift its veto threat.
Friday, July 11, 2008
Compromise bill
BOSTON - The Patrick administration and state legislators from Springfield yesterday agreed on a bill that would give the city 15 years to pay back a $52 million state loan, or three more than the governor originally proposed last month.
The bill needs approval of the state House of Representatives and the Senate to become law, and the governor would also need to sign the legislation.
Because it would further stretch out the period for retiring the loan, the plan could save the city roughly $1 million a year in payments on the loan.
The revision was made in a bill that Gov. Deval L. Patrick submitted last month to improve the operation of city government. Patrick's bill gave Springfield 12 years to pay back the state loan, a period that was upped to 15 years yesterday.
"That extra three years will give us some substantial leeway," said Rep. Sean F. Curran, D-Springfield.
Under a 2004 law that authorized the no-interest state loan and created the Springfield Finance Control Board to oversee city finances, Springfield is required to pay back the money over five years, or $10 million a year. That could mean some cuts in city services unless a bill is passed to extend the payback period.
State Reps. Cheryl A. Coakley-Rivera, Benjamin Swan and Angelo J. Puppolo Jr., all Springfield Democrats, joined Curran yesterday in spelling out some changes to Patrick's legislation.
They said they negotiated the changes in private with David E. Sullivan, lawyer for the state Executive Office of Administration and Finance.
"This is a better bill clearly for the citizens of Springfield," Coakley-Rivera said.
Legislators had originally wanted to give the city 20 years to repay the loan.
The bill needs approval of the state House of Representatives and the Senate to become law, and the governor would also need to sign the legislation.
Because it would further stretch out the period for retiring the loan, the plan could save the city roughly $1 million a year in payments on the loan.
The revision was made in a bill that Gov. Deval L. Patrick submitted last month to improve the operation of city government. Patrick's bill gave Springfield 12 years to pay back the state loan, a period that was upped to 15 years yesterday.
"That extra three years will give us some substantial leeway," said Rep. Sean F. Curran, D-Springfield.
Under a 2004 law that authorized the no-interest state loan and created the Springfield Finance Control Board to oversee city finances, Springfield is required to pay back the money over five years, or $10 million a year. That could mean some cuts in city services unless a bill is passed to extend the payback period.
State Reps. Cheryl A. Coakley-Rivera, Benjamin Swan and Angelo J. Puppolo Jr., all Springfield Democrats, joined Curran yesterday in spelling out some changes to Patrick's legislation.
They said they negotiated the changes in private with David E. Sullivan, lawyer for the state Executive Office of Administration and Finance.
"This is a better bill clearly for the citizens of Springfield," Coakley-Rivera said.
Legislators had originally wanted to give the city 20 years to repay the loan.
Thursday, July 10, 2008
Financial Regulation
Federal officials are converging in support of a sweeping overhaul of financial regulation, making it likely that Wall Street investment banks and other major financial institutions will be subject to a tighter government grip.
Regulators and lawmakers differ on key details about how to move forward, but the impetus for an overhaul appears firmly entrenched, putting it high on the list for action by Congress next year.
At a House Financial Services Committee hearing Thursday, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke agreed that regulators need new tools to deal with financial crises and stronger oversight authority ...
Regulators and lawmakers differ on key details about how to move forward, but the impetus for an overhaul appears firmly entrenched, putting it high on the list for action by Congress next year.
At a House Financial Services Committee hearing Thursday, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke agreed that regulators need new tools to deal with financial crises and stronger oversight authority ...
Senate poised to pass housing bill
NEW YORK (CNNMoney.com) -- The saga still isn't over, but after months of debate on Capitol Hill, the Senate seemed poised Thursday to finally pass a comprehensive housing and foreclosure prevention bill this week.
The measure, which would create a new government-backed foreclosure prevention program and strengthen oversight of Fannie Mae and Freddie Mac, still faces a likely final debate in the House.
The House passed a version of the bill in May and is expected to try to amend some Senate provisions to bring them closer in line with its bill. Any changes will need to be considered by the Senate.
That likely back-and-forth makes it uncertain when lawmakers will be able to send final legislation to President Bush for his consideration. Final passage of a package has been delayed for close to two months due to substantive disagreements as well as countless procedural delays.
On the Senate floor Thursday, one of the lead authors of the bill, Senate Banking Committee Chairman Christopher Dodd, D-Conn., lamented how long it has taken to move the bill through. "Candidly, we can't wait any longer."
Dodd cited the latest foreclosure data, released Thursday, showing 250,000 new foreclosure filings in June, up 53% from a year earlier.
"A lot of us hoped the market would take care of all of this and there would be light at the end of the tunnel," Dodd said. "[But now] the only light at the end of the tunnel is a train coming."
The omnibus housing package attempts to address the housing crisis in several ways. Among them is providing more relief for some borrowers facing foreclosure; increasing access to mortgages in higher-cost areas; modernizing the loan guidelines for the Federal Housing Administration (FHA); and more stringently regulating Fannie and Freddie, the government-sponsored enterprises that have taken a beating this week amidst concern over how well funded they are.
FHA role expansion. Under the Senate bill, the FHA could insure up to $300 billion in new 30-year fixed rate mortgages for at-risk borrowers if their lenders agree to write down their loan balances to 90% of the current appraised value of their homes.
Lenders would also agree to pay upfront fees to the FHA equal to 3% of a home's appraised value. Borrowers must agree to pay an annual premium to the FHA equal to 1.5% of their new loan balance and they must also agree to share with the government any profit they realize from selling or refinancing their home.
The cost of the new FHA program - which will only be in place for a few years - would be funded by fees from Fannie and Freddie. Thereafter those fees would finance an affordable housing trust fund also created by the bill. The House version of the bill calls for those fees to be used solely for affordable housing.
Create a new regulator for Fannie and Freddie. The GSEs, which grease the wheels of the housing market by guaranteeing the purchase and trade of mortgages, will get a new regulator under the bill. That regulator, among other things, will have a greater say over how well funded the agencies are - a major concern in the markets that has sent stocks in both companies plunging.
"We know they play a central role in our housing. We also know that together they owe over $5 trillion in debt, and they're thinly capitalized. The way to keep them [from getting into worse shape] is to create a strong regulator to make sure they're adequately capitalized," Sen. Richard Shelby, R-Ala., another key architect of the bill, said Thursday on the Senate floor.
While the Senate bill calls for the appointment of a new regulator to be made immediately, House Democrats want the appointment to be made 6 months from the date of enactment.
Raise conforming loan limits. The bill would permanently increase the cap on the size of mortgages guaranteed by Fannie and Freddie to $625,000 from $417,000. The FHA maximum loan limits for high-cost areas would also increase to $625,000. The House bill raises the limit at all three agencies to nearly $730,000.
Higher loan limits will make it easier for borrowers to get mortgages, because they're more likely to be traded if they are considered conforming.
Update FHA rules. The bill would update a number of rules for FHA loans. Among them, it would increase to 3.5% from 3% the down payment requirement for borrowers in FHA loans. And it would eliminate a program that has allowed sellers to provide down payment assistance.
The House bill had contained a modified form of the down payment assistance program.
The seller-funded program is largely the reason why the agency's reserve has fallen by $4.6 billion, according to congressional testimony of FHA Commissioner Brian Montgomery. Currently, that reserve is roughly $16.4 billion.
Provide housing-related tax credits. The Senate bill includes more than $14 billion in tax credits. One is an $8,000 tax refund for first-time home buyers. The refund, however, serves more as an interest-free loan, since it would have to be paid back over 15 years by the buyer.
Help states buy foreclosed properties. Despite a White House veto threat, the Senate bill still contains a provision that would provide states with $4 billion to buy and fix up foreclosed properties.
The House is expected to debate whether or not the provision should stay and also whether it should be paid for by raising an equal amount of revenue elsewhere. If not, it could be considered emergency spending, in which case lawmakers would not have to compensate for the cost of the provision.
The measure, which would create a new government-backed foreclosure prevention program and strengthen oversight of Fannie Mae and Freddie Mac, still faces a likely final debate in the House.
The House passed a version of the bill in May and is expected to try to amend some Senate provisions to bring them closer in line with its bill. Any changes will need to be considered by the Senate.
That likely back-and-forth makes it uncertain when lawmakers will be able to send final legislation to President Bush for his consideration. Final passage of a package has been delayed for close to two months due to substantive disagreements as well as countless procedural delays.
On the Senate floor Thursday, one of the lead authors of the bill, Senate Banking Committee Chairman Christopher Dodd, D-Conn., lamented how long it has taken to move the bill through. "Candidly, we can't wait any longer."
Dodd cited the latest foreclosure data, released Thursday, showing 250,000 new foreclosure filings in June, up 53% from a year earlier.
"A lot of us hoped the market would take care of all of this and there would be light at the end of the tunnel," Dodd said. "[But now] the only light at the end of the tunnel is a train coming."
The omnibus housing package attempts to address the housing crisis in several ways. Among them is providing more relief for some borrowers facing foreclosure; increasing access to mortgages in higher-cost areas; modernizing the loan guidelines for the Federal Housing Administration (FHA); and more stringently regulating Fannie and Freddie, the government-sponsored enterprises that have taken a beating this week amidst concern over how well funded they are.
FHA role expansion. Under the Senate bill, the FHA could insure up to $300 billion in new 30-year fixed rate mortgages for at-risk borrowers if their lenders agree to write down their loan balances to 90% of the current appraised value of their homes.
Lenders would also agree to pay upfront fees to the FHA equal to 3% of a home's appraised value. Borrowers must agree to pay an annual premium to the FHA equal to 1.5% of their new loan balance and they must also agree to share with the government any profit they realize from selling or refinancing their home.
The cost of the new FHA program - which will only be in place for a few years - would be funded by fees from Fannie and Freddie. Thereafter those fees would finance an affordable housing trust fund also created by the bill. The House version of the bill calls for those fees to be used solely for affordable housing.
Create a new regulator for Fannie and Freddie. The GSEs, which grease the wheels of the housing market by guaranteeing the purchase and trade of mortgages, will get a new regulator under the bill. That regulator, among other things, will have a greater say over how well funded the agencies are - a major concern in the markets that has sent stocks in both companies plunging.
"We know they play a central role in our housing. We also know that together they owe over $5 trillion in debt, and they're thinly capitalized. The way to keep them [from getting into worse shape] is to create a strong regulator to make sure they're adequately capitalized," Sen. Richard Shelby, R-Ala., another key architect of the bill, said Thursday on the Senate floor.
While the Senate bill calls for the appointment of a new regulator to be made immediately, House Democrats want the appointment to be made 6 months from the date of enactment.
Raise conforming loan limits. The bill would permanently increase the cap on the size of mortgages guaranteed by Fannie and Freddie to $625,000 from $417,000. The FHA maximum loan limits for high-cost areas would also increase to $625,000. The House bill raises the limit at all three agencies to nearly $730,000.
Higher loan limits will make it easier for borrowers to get mortgages, because they're more likely to be traded if they are considered conforming.
Update FHA rules. The bill would update a number of rules for FHA loans. Among them, it would increase to 3.5% from 3% the down payment requirement for borrowers in FHA loans. And it would eliminate a program that has allowed sellers to provide down payment assistance.
The House bill had contained a modified form of the down payment assistance program.
The seller-funded program is largely the reason why the agency's reserve has fallen by $4.6 billion, according to congressional testimony of FHA Commissioner Brian Montgomery. Currently, that reserve is roughly $16.4 billion.
Provide housing-related tax credits. The Senate bill includes more than $14 billion in tax credits. One is an $8,000 tax refund for first-time home buyers. The refund, however, serves more as an interest-free loan, since it would have to be paid back over 15 years by the buyer.
Help states buy foreclosed properties. Despite a White House veto threat, the Senate bill still contains a provision that would provide states with $4 billion to buy and fix up foreclosed properties.
The House is expected to debate whether or not the provision should stay and also whether it should be paid for by raising an equal amount of revenue elsewhere. If not, it could be considered emergency spending, in which case lawmakers would not have to compensate for the cost of the provision.
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