AUDIO: House OKs housing rescue package

WASHINGTON, D.C.
May 8, 2008 12:01am

The U.S. House of Representatives approved Thursday a package of proposals designed to rescue the flailing housing industry and homeowners faced with foreclosure.

The bill voted on Thursday, dubbed the "American Housing Rescue and Foreclosure Prevention Act of 2008," will provide mortgage refinancing assistance, which the bill's supporters say will help keep families from losing their homes and protect neighboring home values.

In order to qualify for refinancing and new government backed mortgages, lenders and mortgage investors will be required to take a loss and borrowers must share any profit from the resale of a refinanced home with the government. Additionally, the new plan is open only to owner-occupied homes.

Speculators, investors and vacation/second-home owners are not eligible to participate.

Other provisions of the legislation include an increase in the loan limit for VA-backed originating loans and increased oversight for Fannie Mae and Freddie Mac.

The House also passed the Neighborhood Stabilization Act of 2008, which provides $15 billion in loans and grants to states to acquire vacant, foreclosed homes. The legislation will allow local communities to rehabilitate foreclosed properties, which currently drive down surrounding home prices, and place these homes back on the market.

But for if it to become law, Congress likely would have to do something that it has been virtually incapable of doing – overriding a threatened veto by President George W. Bush.

Mr. Bush says he will veto the bill as it stands, saying Congress ought to pass a Republican-authored bill instead.

But Central Valley Congressman Jerry McNerney, who has a proposal in the bill to raise the loan limits for Fannie Mae, Freddie Mac, and the Federal Housing Administration, says there may be enough support to cancel a presidential veto.

“I don’t know what the President’s going to do but there’s really strong support for this here in the House and I think in the Senate as well,” Mr. McNerney says. “I think we’ll be in good shape to try and override that veto.”

(Listen to a short interview with Mr. McNerney by clicking on the link below.)

Mr. McNerney’s contribution to the bill would make permanent the temporary increases in loan limits for Fannie Mae and Freddie Mac, and the Federal Housing Administration (FHA) that were part of the so-called “Economic Stimulus Act” signed into law in February.

H.R. 5958 would ensure that the maximum limits of $729,750 are maintained, opening mortgage opportunities for families to obtain fixed-rate mortgages and help alleviate the current market difficulties. The bill will mean an expansion in loan limits and access to stable mortgage products in all four counties in the 11th district: Alameda, Contra Costa, San Joaquin and Santa Clara.

If Congress does not act, the FHA loan limit would revert back to $362,790, well below the median home price in the four counties. Additionally, the Fannie Mae and Freddie Mac conforming loan limit would fall to $417,000 at the end of the year.

Another major part of the House bill is helping homeowners who cannot make mortgage payments that have reset to higher interest rates and who cannot sell their homes for enough money to cover the existing mortgage – a situation termed “being underwater” or “upside down.”

The House bill would have the FHA deal more aggressively with the problem and encourage banks to forgive a percentage of the debt.