[July 23, 2008]

House approves housing rescue legislation

(South Florida Sun-Sentinel (KRT) Via Acquire Media NewsEdge) WASHINGTON _ Homeowners who are struggling to make mortgage payments and keep their homes finally got a break on Wednesday when Congress neared final agreement on landmark housing legislation.

The federal rescue package is especially welcome in regions that suffer from high foreclosure rates and plunging property values.

"If they don't fix this, it will destroy the whole fabric of the United States," said Michael Ettus, 53, a Hallandale Beach, Fla., resident facing foreclosure on his condominium. "If they don't, they'll be like ostriches with their heads in the sand."

Similar demands from homeowners around the country and fears of a potential collapse by government-backed lenders prompted the House on Wednesday to approve the rescue package.

The bill would encourage banks and other lenders to refinance troubled mortgages, backed by $300 billion of federal guarantees. It would give first-time home buyers a $7,500 tax cut. And it would extend a financial lifeline to mortgage giants Freddie Mac and Fannie Mae.

The Senate is expected to pass the same bill this week or next week. President Bush, who once threatened to veto an earlier version, indicated on Wednesday he would sign the bill into law, largely to prop up Freddie Mac and Fannie Mae.

The House vote was 272-152.

"This will allow lenders to get mortgage payments down to what a homeowner can afford," said Rep. Ron Klein, D-Fla., a member of the Financial Services Committee that drafted the bill. "The benefit the bank gets is a federal guarantee on that loan."

Lenders would have the option, but no requirement, to refinance loans at lower amounts to avoid costly foreclosures.

If owners fail to meet the new payments, the Federal Housing Administration would step in to pay off the loans, giving lenders a guarantee.

"A number of large lenders say they will take advantage of this," Klein said. "Banks do not want to foreclose because they have to take over the taxes, assessments and maintenance. When you board up a property, it loses value."

The government-backed loans would apply only to owner-occupied homes, not second houses, investment property or vacation homes.

Though the Bush administration dropped its opposition, critics in Congress called the bill a bailout for speculators and irresponsible buyers who bought more house than they could afford. They feared that taxpayers will bear a big burden if the government is forced to make good on bad loans.

"When people are struggling to pay their own mortgages and acted responsibly, they shouldn't be forced to pay for their neighbors as well, much less bail out Wall Street," said Rep. Jeb Hensarling R-Texas.

Most members, however, were eager to do something to stem the tide of foreclosures.

They and the Bush administration also felt compelled to lend more government money to Freddie Mac and Fannie Mae to prevent the government-backed lenders from collapsing.

Even Hensarling acknowledged, "They are too big to allow to fail."

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Support for the relief package is especially strong in Florida, particularly Broward and Palm Beach counties, which have been hammered by home foreclosures during the past two years.

Escalating home values from 2000 to 2005 caused many buyers to overextend themselves. They took out short-term, adjustable-rate mortgages that are resetting at much higher interest rates.

The rise in foreclosures is partly why the housing market in South Florida and the rest of the country remains in such turmoil.

The relief package sounds promising to Jessica Cecere, president of the Consumer Credit Counseling Service in West Palm Beach, Fla. She said her agency is helping 60 percent of its clients avoid foreclosure and stay in their homes.

"To be able to help more [homeowners] than that would be fantastic," she said.

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