In a rare Saturday session the Senate passed a housing rescue legislation aimed at helping struggling homeowners avoid foreclosure and providing financial support to troubled mortgage giants Fannie Mae and Freddie Mac – the vote passed 72 to 13.
The bill, which cleared the House Wednesday by a 272-152 vote after months of political power struggle and negotiations between the House and Senate, Treasury Department, and other federal regulators, now goes to President Bush. The White House said Bush will sign it quickly, even though he has expressed concern about $4 billion in the bill aimed at helping communities buy and restore foreclosed homes.
Included in the bill is a $300 billion program to refinance loans for struggling borrowers and an ambitious rescue plan for Fannie Mae and Freddie Mac. The bill would give the Treasury Department authority to provide support as needed to government-sponsored agencies Fannie and Freddie, which guarantee or own nearly half the nation’s mortgages. It would also raise the size of mortgages that can be purchased by Fannie and Freddie and insured by the FHA, the report added. Concerns about the companies’ financial stability have dented their shares and sparked fears that a failure of one or both could have catastrophic consequences for the already depressed U.S. housing market.
The legislation would also help some 400,000 homeowners avoid foreclosure by refinancing into affordable loans backed by the Federal Housing Administration.
Policymakers hope the wide-ranging bill will help invigorate a housing market that continues to collapse and has roiled financial markets worldwide. Data released in recent weeks reveal that home sales have hit a 10-year low and home prices continue to decline around the country. Importantly, the number of homeowners facing foreclosures continues to rise, raising the specter of vacant homes and ruining many neighborhoods.
The bill also includes tax relief for future homebuyers and current homeowners. Those buying a home between April of this year and through June of next year would receive a tax credit for 10% of the value of their home, up to $7,500, while current homeowners who do not itemize their tax returns would be able to deduct up to $1,000 for property taxes.
Other provisions include nearly $4 billion in grant money to state and local governments to buy up and rehabilitate foreclosed homes. Intended to avoid community blight in areas hard hit by foreclosure, the program directs that homes purchased through the program be offered to low and moderate income families.