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House Votes to Aid Struggling Homeowners
By MARCY GORDON
AP Business Writer
WASHINGTON (AP) -- The House on Tuesday approved a plan
to expand federal backing of mortgages in hopes of helping
struggling homeowners avoid foreclosure. Despite some
White House objections, the Bush administration and House
Democrats took conciliatory stances pointing toward resolving
their differences.
The bill passed the House 348-72. It would allow the
Federal Housing Administration, which insures mortgages
for low- and middle-income borrowers, to back refinanced
loans for tens of thousands of borrowers who are delinquent
on payments because their mortgages are resetting to
sharply higher rates from low initial "teaser" levels.
Brian Montgomery, the Housing and Urban Development
assistant secretary who heads the FHA, said the legislation
could enable more than 200,000 homeowners whose loans
are excluded from federal backing to come under the agency's
umbrella.
"This is a historic day for FHA," Montgomery
told reporters after the vote. He said the administration
remains concerned about specific provisions - notably
much higher limits in the bill for mortgages that could
be insured by the agency, as much as $729,750 in high-cost
areas compared with the current $362,000. However, Montgomery
added, "I feel optimistic we'll work out these differences" as
the legislation moves through Congress.
In the Senate, the Banking Committee is expected to
vote Wednesday on a version of the legislation proposed
by panel chairman Sen. Christopher Dodd, D-Conn., and
its senior Republican, Sen. Richard Shelby of Alabama.
The House measure is Congress' first stand-alone bill
passed in response to the mortgage-market tumult of the
summer, which came amid a rising tide of defaults and
foreclosures. The Senate last week approved spending
legislation that includes $200 million in aid to nonprofits
and other groups that offer counseling and information
to help homeowners avoid foreclosure.
"The American dream is in peril for many families
in this country as foreclosures rise and dreams shatter," Rep.
Betty Sutton, a Democrat from Ohio, a state particularly
hard-hit by the default wave, declared in House debate
before the vote.
Rep. Barney Frank, D-Mass., chairman of the House Financial
Services Committee, said he wanted to whisk the new House
measure to the Senate along with a bill to tighten government
oversight of mortgage finance giants Fannie Mae and Freddie
Mac. The administration has insisted such legislation
was needed before restraints on the amounts of mortgage
securities the two government-sponsored companies are
allowed to buy and hold could be eased.
Frank said he was ready to be flexible in negotiations
with the White House on the legislative proposals and
that he believed their enactment was possible before
Thanksgiving.
In debate, House Republicans sharply objected to a $300
million-a-year fund for grants for affordable rental
housing and homeownership assistance for low-income families,
which would be financed from FHA revenues - a plan also
opposed by the administration. Rep. Ed Royce, R-Calif.,
called it "an experiment in socialism."
But Republicans mostly were swept along in the vote
for the bill, whose overall thrust they endorsed in the
face of the mortgage crisis.
The bad news deepened again on Tuesday. Research firm
RealtyTrac Inc. said the number of foreclosure filings
reported in the United States last month more than doubled
compared with August 2006 and jumped 36 percent from
July - a trend signaling that many homeowners are increasingly
unable to make timely payments on their mortgages or
sell their homes amid the housing slump.
An estimated 2 million to 2.5 million adjustable-rate
mortgages are scheduled to "reset" this year
and next, jumping from low "teaser" rates for
the first two or three years to much steeper rates that
could cost borrowers their homes. The wave of resets
could crest during the presidential and congressional
election campaigns next year, and the issue has brought
politically charged debate in recent weeks over possible
responses by the government.
At the same time, turbulence in financial and credit
markets resulting from the mortgage upheaval has cast
a shadow over the economy and raised the specter of a
possible recession.
Government officials and real-estate industry interests
maintain that the FHA, which now backs some 3.7 million
loans in the event of default, is hamstrung by existing
law. The size of mortgages the agency can insure is often
too small to attract borrowers in expensive areas such
as California and the Northeast - reducing the FHA'S
share of the home-loan market to around 4 percent from
19 percent a decade ago.
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