The US House of Representatives passed legislation on Wednesday that aims to help 400,000 strapped US homeowners avoid foreclosures and prevent troubled mortgage giants Fannie Mae and Freddie Mac from collapsing.
The 272-152 vote reflected a congressional push to send election-year help to struggling borrowers and reassuring jittery financial markets about the health of two pillars of the mortgage market.
The measure is on track to pass the Senate and become law within days, after US President George W. Bush dropped his opposition.
The White House swallowed its distaste for US$3.9 billion in grants the bill would provide for devastated neighborhoods, in exchange for a measure to rein in Fannie Mae and Freddie Mac, the government-sponsored mortgage firms, and the power to throw them a financial lifeline. Foreigners have millions of dollars invested in the two quasi-government agencies.
The administration and lawmakers in both parties teamed to negotiate the measure, which also accomplishes top Democratic priorities, including federal help for homeowners, a new permanent affordable housing fund financed by Fannie and Freddie, and the US$3.9 billion for hard-hit neighborhoods. The grants are for buying and fixing up foreclosed properties.
Treasury Secretary Henry Paulson and lawmakers in both parties negotiated the final deal. It accomplishes several Democratic priorities, including aid for homeowners, a permanent affordable housing fund financed by the two mortgage companies and the money for hard-hit neighborhoods. The grants are for buying and fixing up foreclosed properties.
“It is the product of a very significant set of compromises,” Representative Barney Frank said, chairman of the House Financial Services Committee.
“We are dealing with the consequences of bad decisions and inaction and malfeasance from years before,” Frank said, a Democrat from Massachusetts.
Paulson said he would push for enactment of the bill by week’s end. Despite disappointment with some items rejected, he said “portions of this bill are orders of magnitude more important to turning the corner on the housing correction and supporting our markets and our economy.”
In a policy statement on the bill, the White House said that parts of it “are too important to the stability of our nation’s housing market, financial system, and the broader economy not to be enacted immediately.”
Bush had objected to the neighborhood grants, saying that they would help bankers and lenders, not homeowners who are in trouble.
Still, Dana Perino, the White House press secretary, told reporters in a conference call that a showdown with Congress over the funds would be ill-timed.
But it was a striking split for Bush and congressional Republicans. Party leaders denounced the housing legislation as a bailout for irresponsible homeowners and unscrupulous lenders, even as they acknowledged it was probably necessary.
“It’s a bill that I wish I could support. It’s a bill that the market clearly needs, ... but this is not a bill that I can support,” said Representative John Boehner, the Republican minority leader.
That 45 Republicans, mostly from districts ravaged by the housing crisis, voted “yes” reflected the political potency of the package at a time when economic worries are foremost in voters’ minds.
The measure hands the Treasury Department the power to extend the government-sponsored mortgage companies an unlimited line of credit and to buy an unspecified amount of their stock, if necessary, to prop up congressionally chartered Fannie Mae and Freddie Mac. The firms back or own US$5 trillion in US mortgages, almost half the nation’s total.
Senator Richard Shelby, the senior Banking Committee Republican who was his party’s lead negotiator on the measure, said Bush’s turnabout reflected political reality.
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