Housing bill OK’d, faces veto

WASHINGTON—The House passed yesterday a massive homeowner rescue plan to provide cheaper, government-backed mortgages to half a million debt-ridden borrowers and bolster an economy hit by the housing crunch.

Defying veto threats from President Bush, the House approved the measure by a vote of 266-154, with 39 Republicans—mostly from areas suffering worst from housing woes—supporting it.

Virginia’s House delegation voted along party lines, with Democrats favoring the bill and Republicans voting against it.

The bill would let the Federal Housing Administration take on up to $300 billion in new mortgages so that financially strapped borrowers facing foreclosure could refinance.

The plan by Rep. Barney Frank, D-Mass., is the centerpiece of a broader package of bills approved yesterday that Democrats say will prevent more foreclosures and help homeowners and communities deal with the fallout from the mortgage meltdown.

“We are in a recession, and the major cause of that is the subprime crisis,“ said Frank, the Financial Services Committee chairman. “Diminishing the number of foreclosures is in the interest not simply of those who will avoid foreclosure, but people in their neighborhood, [in] the cities in which they are located, and the whole economy.“

Proponents hope the package—which awaits action in the Senate—will serve as the basis for a bipartisan housing compromise that could satisfy both parties’ appetite for delivering election-year aid to anxious constituents.

But Bush’s veto warnings, bolstered by staunch GOP opposition, are clouding its prospects.

“House Democrats passed bills that they know will never become law. Most Americans understand that we shouldn’t create a taxpayer-funded bailout for lenders and speculators,“ said Tony Fratto, a White House spokesman.

The House 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 cause the housing chaos.

Republicans argued that both measures would reward lenders and irresponsible borrowers at the expense of homeowners and renters who made more prudent choices and are straining to cover their costs in a punishing economic climate.

“The vast majority of Americans who find themselves struggling with mortgage payments, struggling with high gas prices, struggling with high food crises are now going to assume responsibility for ill-advised financial decisions and misjudgments of other people,“ said Rep. Spencer Bachus, R-Ala.

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 help roughly 500,000 borrowers at a cost of $2.7 billion over the next five years.