WASHINGTON — It took fears of a market collapse to push President Bush and Congress to compromise on election-year mortgage help for struggling homeowners.
Foreclosures are rising and home prices falling. And the prospect that Fannie Mae and Freddie Mac, pillars of the home-loan market, could fail was a scenario that no one could tolerate.
The deal Congress sent to the White House on Saturday after a Senate vote could benefit as many as 400,000 homeowners. Bush said he would sign it promptly, despite reservations.
For people who cannot afford their monthly payments, the bill lets them refinance into more affordable government-backed loans rather than lose their homes.
Regarded as the most significant housing legislation in decades, the plan also offers a temporary financial lifeline to Fannie Mae and Freddie Mac, whose losses have sparked investor fears, and tightens controls over the two government-sponsored businesses.
What began as a showdown between the White House and the Democratic-led Congress over how far the government should go in rescuing homeowners evolved into a bipartisan effort that could be the last such compromise before Bush leaves office in January.
In a rare Saturday session, the Senate voted 72-13 to send the bill to the president; the House passed it Wednesday.
Bush had withdrawn his veto threat over $3.9 billion in neighborhood grants. He contended the money would benefit lenders who helped cause the mortgage meltdown, encouraging them to foreclose rather than work with borrowers.
“Because of the Democratic Congress’ delays and the need for action now, President Bush will sign this bill when he receives it, despite our concerns with some provisions, including nearly $4 billion to help lenders, not the homeowners this legislation is intended to serve,” said Tony Fratto, deputy White House press secretary.
Many Republicans, particularly those from areas hit hardest by housing woes, were eager to get behind a housing rescue as they looked ahead to tough re-election contests. Treasury Secretary Henry Paulson’s request for the emergency power to rescue Fannie Mae and Freddie Mac helped push through the measure. So did the creation of a regulator with stronger reins on the government-sponsored companies, as Republicans long have sought.
Democrats won cherished priorities in the bargain: the aid for homeowners, a permanent affordable-housing fund financed by Fannie Mae and Freddie Mac, and the neighborhood grants.
“This is far more than sending a bill to the president’s desk for his signature. It’s sending a message to the American people that the Congress of the United States — despite an alternative reputation — can actually get things done and can work together to achieve a good result,” said Sen. Chris Dodd, chairman of the Senate Banking, Housing and Urban Affairs Committee.
Still, Republicans weren’t eager to celebrate. Bush was not expected to hold a signing ceremony, and Senate GOP leaders didn’t mention it at a news conference after the vote.
In the House, more than three-quarters of Republicans voted against the bill.
Conservative Republicans opposed the bill. Critics charge that Fannie Mae and Freddie Mac enjoy lavish profits in good times and wield their outsized political clout to resist regulation while depending on the government to bail them out should they falter.
What the bill would do
The housing bill Congress sent to President Bush would:
• Give the Federal Housing Administration $300 billion in new lending authority and relax standards to provide affordable, fixed-rate mortgages to an estimated 400,000 debt-ridden homeowners. Any losses would be covered by an affordable- housing fund financed by Fannie Mae and Freddie Mac, the government- sponsored companies that finance mortgages.
• Allow the Treasury Department temporary authority to lend money to Fannie and Freddie or buy their stock to avert a collapse of one or both of the mortgage giants. The authority would expire Dec. 31, 2009.
• Create a new regulator and tighten controls on Fannie and Freddie, including power for the regulator to approve pay packages for company executives. Create a new affordable-housing fund drawn from their profits. Permanently raise the limit on the loans they may buy to $625,000 in the highest-cost areas. Allow them to buy loans 15 percent higher than the median home price in some cities.
• Provide $3.9 billion in grants to the hardest-hit communities for buying and fixing up foreclosed property.
• Modernize the FHA and allow it to back loans for riskier borrowers. Permanently increase the size of loans the agency may insure to $625,000 in the highest – cost areas.
• Provide $15 billion in housing tax breaks, including for low-income housing. Give a credit of up to $7,500 for first-time homebuyers who purchase residences between April 9, 2008, and July 1, 2009. The Associated Press
