House OKs housing rescue despite veto threat

Under Frank’s plan, homeowners currently considered too risky to qualify could refinance into FHA-backed loans if their lenders agreed to take substantial losses on the original mortgages. Borrowers would have to show they could afford to make payments on the new loans. They would have to share with FHA at least half of their proceeds if they profited from selling or refinancing again.

The plan is projected to cost $2.7 billion over the next five years.

Republican backers said they were putting aside their philosophical objections to a government-based rescue due to the severity of the housing crisis that has hit their constituents.

“There are 500,000 real families with children out there who are going to be helped by this,” said Ric Keller, R-Fla. “It may not be a perfect bill, but good people in my home state of Florida need help, and in my view, this is the only train leaving the station.”

Indeed, with a legislative schedule squeezed by the November elections, Congress has just a couple of months to come to terms with the White House on a housing package. Sen. Christopher J. Dodd, D-Conn., the Banking Committee chairman, has been searching for an elusive bipartisan deal on a similar measure, which he hopes his panel can vote on next week.

The House on Thursday also passed, 239-188 a bill to send $15 billion to states to buy and fix up foreclosed property. Bush has also threatened to veto that measure, contending it rewards the very lenders who helped caused the housing chaos and could act as an incentive for them to foreclose rather than find ways to help struggling borrowers stay in their homes.

Proponents say it will prevent blight in neighborhoods plagued by abandoned, foreclosed homes.

Democrats, seeking Republican broad support for Frank’s housing plan, also added a grab-bag of measures Bush has sought.

Those included legislation to overhaul the FHA, to more tightly regulate government-sponsored mortgage giants Fannie Mae and Freddie Mac, and authority for state and local housing finance agencies to use tax-exempt bonds to refinance distressed subprime mortgages.

They also attached a housing tax credit of up to $7,500 for first-time home-buyers, to be paid back over 15 years.

The package permanently raises the limit on the size of loans FHA could insure and Fannie Mae and Freddie Mac could buy to $729,750 in the highest-cost housing markets. Those caps are scheduled to fall at the end of the year, to $362,790 for the FHA, and to $417,000 for Fannie Mae and Freddie Mac.

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