05-08-08

Today the House voted to pass a housing rescue bill. The measure was passed by 266-154 and includes the support of 40 republicans however the bill fell short of the 2/3 needed to override a presidential veto. This bill would provide up to $300 billion in aid to housing market and help to rescue homeowners who are facing foreclosure because of predatory lending and the downturn in the housing market making normal refinancing impossible.

Despite this good news the White House spokesman (Mr Fratto) for the Bush administration said in very clear terms “Right now, we want to make clear to Congress that the bill as it is won't become law..” Majority of Republicans said this legislation lets homeowners off the hook too easily and said it could potentially put tax payers at risk. They reasserted that the housing crisis is the problem of the lenders and borrowers affected, and not the problem of the American tax payer. However not all republicans are united behind those statements anymore, for example Rep Steven LaTouretta of Ohio is taken back that some of his GOP counterparts would consider this a bailout.

This bill would allow the FHA to refinance up to $300 billion in troubled mortgages and provides for a clear way for both banks and homeowners to avoid foreclosure. The measure would also protect the banks from investor lawsuits and provide many needed safe guards. Basically how it would work is the banks would write down the amount of the loan to allow for significant monthly savings to the homeowner and the FHA would then refinance the remainder of the balance.

This legislation is now off to Congress for debate, however Senate Banking Committee Chairman Christopher Dodd is expected to propose his own version of this bill on May 13th. We will be tracking the progress of that bill as well.

Discuss this news here