WASHINGTON — The House approved a sweeping plan Wednesday that responds to the most serious housing crisis since the Great Depression by providing a federal backstop for struggling mortgage giants Fannie Mae and Freddie Mac and aid to homeowners facing foreclosure.
In a sign of election-year anxiety over the economy, the White House, in a turnabout, dropped its veto threat and signaled that President Bush would sign the measure, even though it includes a provision he opposed to provide $4 billion for communities to buy and fix up abandoned properties.
“This is the most important piece of housing legislation in a generation,” said Senate Banking Committee Chairman Christopher Dodd, D-Conn.
The Senate could approve the measure before the end of the week.
The measure includes a plan by Treasury Secretary Henry Paulson aimed at bolstering confidence in Fannie and Freddie by allowing the government to temporarily increase its lending to the government-chartered but privately owned companies and to buy stock in them, if necessary.
It also aims to stimulate the housing market and help keep 400,000 or more homeowners out of foreclosure. It includes about $15 billion in housing tax breaks, including a tax credit of up to $7,500 for first-time homebuyers.
Of interest to states with high housing costs, it would permanently raise to $625,500 the cap on mortgages that Fannie Mae and Freddie Mac can buy or guarantee.
“This bill offers hope that if we can get this industry up and moving again and provide security for distressed home owners, maybe the economy will respond and get back on track as well,” said Rep. Richard E. Neal, D-Mass.
The 272-152 House vote came a day after a report that a record number of Californians lost their homes to foreclosure in the past three months, adding urgency to congressional action.
The vote laid bare divisions within the Republican ranks as its members came under pressure from the White House to support the measure but also expressed concern about its potential cost to taxpayers.
“Just because the housing market has tumbled doesn’t mean we should capriciously finance a big, fat government bailout,” said Rep. Sam Johnson, R-Texas.
House Republican leader John Boehner of Ohio expressed disappointment that the president would sign a “multibillion-dollar bailout for scam artists and speculative lenders at the expense of American taxpayers.”
“I’m concerned that we are putting a massive burden on taxpayers for Wall Street’s bad decisions and those of speculators who took on risky mortgages,” said Rep. Kevin Brady, R-Texas.
The Congressional Budget Office has said Fannie and Freddie stand a “better than 50 percent chance” of weathering the housing crisis without a government rescue but that the bailout could cost $25 billion.
A memo issued by the office of House Speaker Nancy Pelosi, D-Calif., warned that if Fannie and Freddie failed, dire consequences would result.
“Money for new mortgages would dry up,” the memo said. “Home prices, already falling, would collapse. More homeowners would default.”
The memo also said it could lead to new bank failures and a “deep recession.”
“I must commend the president. I’ve never thanked him for anything,” said Rep. Maxine Waters, D-Calif., praising Bush for withdrawing his veto threat.
The White House had objected to the $4 billion for communities to buy foreclosed property, calling it a bailout for lenders and speculators. But the provision’s supporters said it would prevent neighborhood blight that can drive down housing prices and reduce tax revenue.
