LJWorld.com / Housing rescue package approved

Archive for Sunday, July 27, 2008

By Robert Schroeder - MarketWatch

July 27, 2008

Washington — The Senate cleared a massive housing bill on Saturday designed to prop up the struggling U.S. housing market and put in place a U.S. backstop for giant mortgage-buyers Fannie Mae and Freddie Mac.

Senate lawmakers approved the bill, which contains billions of dollars in loan guarantees, a tax break for first-time home buyers and many other provisions, by a vote of 72-13.

The bill now will go to President Bush, who has indicated he will sign it despite objections about a provision directing $4 billion in emergency aid to local communities to buy and rehabilitate foreclosed homes.

The measure, approved during a weekend session in the Senate, allows homeowners who cannot afford their monthly payments to refinance into government-backed loans. The bill also offers temporary financial help to Fannie Mae and Freddie Mac.

The bill won approval in the House on Wednesday by a vote of 272-152, overcoming Republican objections about extending an unlimited line of credit to the two government-sponsored mortgage-finance titans.

The bill gained momentum as worries about the health of Fannie Mae and Freddie Mac spread. Some House and Senate Republicans were skeptical of a plan unveiled by Treasury Secretary Henry Paulson on July 13 that extends a line of credit to the two and allows the government to buy their stock if necessary. Paulson’s plan is included in the bill passed by the House and the Senate.

With home prices down 16 percent from their 2006 peak and foreclosures at a record high, lawmakers have been working on the housing bill for months in an effort to help homeowners and the overall market.

The bill contains a tax break of as much as $7,500 for first-time home buyers, creates a new regulator to oversee Fannie Mae and Freddie Mac and allows the government to insure up to $300 billion in refinanced mortgages.