Senate Passes Contentious Housing Package; Bush Offers Own Plan

by Amy Lillard

A bipartisan package offering assistance to businesses and homeowners hurt by the housing crisis passed the Senate today with an impressive 84-12 vote.

The plan includes large tax breaks for homebuilders, a $7,000 tax credit for buyers of foreclosed properties, and $4 billion in grants to buy and improve abandoned homes. The bill also includes $150 billion in pre-foreclosure counseling and stronger loan disclosure requirements. Finally, it includes $10 billion in tax-free mortgage revenue bonds to help homeowners refinance subprime loans.

Despite the show of support, the bill has many detractors including the House and the Bush Administration. Opponents claim the package is biased in favor of businesses instead of homeowners and bails out lenders with taxpayer money. They contend the tax credit for the purchase of foreclosed homes will unfairly reward purchases happening anyway, give banks an incentive for foreclosure, and depress home values. The House will likely reject key points in the package.

Another key sticking point seems to be the $25 billion tax break offered to homebuilders and other businesses experiencing heavy losses. The tax break was dropped from an earlier bill after criticism, but was added to this package after increasing worries among the public and policymakers about the housing crisis.
The Bush administration offered its own proposal on Wednesday. This narrower plan aims to rescue 100,000 homeowners at risk of foreclosure with relaxed government-backed loans standards and increased loan forgiveness.

Subprime borrowers who have missed two or three mortgage payments will be eligible for assistance from the Federal Housing Administration. More specifically, borrowers who have missed two payments and have at least 3 percent equity, and those who have missed three payments with 10 percent equity, would be eligible. Lenders will be encouraged to forgive portions of some loans and enable refinancing.

The plan drew immediate criticism from consumer groups, who said the small measures would do little to help homeowners with no equity and the millions of homeowners facing resetting loans and foreclosure.

Washington Post Article:
Scant Support for Senate Housing Bill

White House Presents Plan To Aid Subprime Borrowers