Foreclosure rescue plan advances

Senate-backed program adds $300b for loans

June 25, 2008|Associated Press

WASHINGTON - A massive foreclosure rescue bill cleared a key Senate test yesterday by an overwhelming margin, with Democrats and Republicans both eager to claim election-year credit for helping hard-pressed homeowners.

The mortgage aid plan would let the Federal Housing Administration back $300 billion in new, cheaper home loans for an estimated 400,000 distressed borrowers who otherwise would be considered too financially risky to qualify for government-insured, fixed-rate loans.

An 83-to-9 vote put the plan on track for Senate passage as early as today, but President Bush is threatening a veto, and Democrats are fighting each other over key details. Those challenges will probably delay any final deal until mid-July.

The bill advanced as separate reports underscored rising economic anxiety: Consumer confidence slid to its lowest level in more than 16 years, and closely watched indexes showed a continuing decline in home values.

At the Capitol, Senator Christopher J. Dodd, a Connecticut Democrat, the Banking Committee chairman, said the lending measure "would allow us to begin to put a tourniquet on the hemorrhaging of foreclosures in this country."

Still, conservative Democrats known as "Blue Dogs" are concerned about how to pay for the measure, and members of the Congressional Black Caucus call it unacceptable, arguing it doesn't do enough to address the needs of black Americans.

Congressional leaders also are divided on how high to place loan limits that apply to government mortgage insurance and financing. The Senate bill sets those limits at $625,000 while a House-passed version puts them at $730,000 - a crucial difference in high-cost housing markets like California, home to House Speaker Nancy Pelosi.

Lawmakers have been negotiating behind the scenes with the Bush administration to avert a veto. Dana Perino, the White House spokeswoman, told reporters the Senate measure has "some really good aspects" and Congress is "on the right path."