Senators on both sides of the aisle are urging that more help be
included in the stimulus package to tackle what many view to be the
root cause of the weakened U.S. economy: the housing market.
They argue that not including much in the recovery legislation
to address the foreclosure crisis and to kick-start housing market
activity is a failing on the part of congressional Democrats and
President Barack Obama's administration.
We need to go straight at the housing issue because that's the
underlying cause of the recent downturn. Republicans think we need
to fix this problem before we do anything else," said Senate
Minority Leader Mitch McConnell, R-Ky.
Democrats counter that the stimulus plan is aimed at providing
an immediate shot in the arm to the economy, and that fixing the
problems besetting the housing market will require a
several-pronged effort by Congress and the administration.
They point to a commitment by President Obama to use up to $100
billion of the second tranche of $350 billion released to the
Treasury under the financial rescue package to tackle the record
numbers of foreclosures.
And they said that House Financial Services Chairman Barney
Frank, D-Mass., is working with Treasury Secretary Timothy Geithner
on a comprehensive housing package, details of which could be
released as soon as next week.
"Just because there isn't enough housing articles in this
legislation to please some people doesn't mean it won't get done
another way," Senate Majority Leader Harry Reid said at a press
conference Thursday.
Republican lawmakers are pulling together a package of housing
measures they hope to introduce as an amendment to the recovery
package on the floor of the Senate next week.
Without a more significant housing element and other changes,
Senate Republicans say they are unlikely to vote for the stimulus
package next week.
The highlight of that package would be a 4% discounted mortgage
rate subsidized by the federal government available to prospective
homebuyers and owners looking to refinance.
The rate would be available for a limited time, and would be
locked in for 30 years.
A spokeswoman for Senate Minority Leader McConnell said details
such as whether the federal government would reimburse banks for
the difference between commercial mortgage rates and the subsidized
rate, or if qualified borrowers would receive a tax rebate for the
difference, were still being finalized.
The spokeswoman, Jennifer Morris, said that the discounted rate
would save the average borrower $5,600 a year.
"We have at least a trillion dollars in losses left in our
banking system," said Sen. Bob Corker, R-Tenn. "To not be using
some of these monies to really focus on housing and credit to me is
a tremendous missed opportunity."
Homebuyers Credit
The primary housing-related component of the stimulus package is
language waiving the obligation upon people to pay back a $7,500
first-time homebuyers credit.
The credit was created in housing legislation last year,
structured as a no-interest loan that would have to be paid back
over a 15 year period. The House version of the stimulus bill would
waive the repayment on homes purchased from Jan. 1 through the end
June, while the Senate bill would do so through Aug. 30.
Sen. Johnny Isakson, R-Ga., has proposed a larger tax credit of
either $15,000, or 10%, of the purchase price, whichever is
smaller. It would be available until the end of 2009 and anyone
buying a primary residence could qualify for it.
Under Isakon's plan, individuals would only be able to claim a
credit up to the amount they pay in federal income tax.
The National Association of Realtors and the home builders'
lobby are also pushing Congress to enlarge and revamp the home
buyer credit.
The realtors want Congress to extend it through the end of the
year and make it available to all home buyers. The home builders
are pushing to boost the size of the credit to between $10,000 and
$22,000, depending on local house prices.
It is not just Republicans who are hoping to include measures to
tackle the housing crisis in the legislation. Sen. Christopher
Dodd, D-Ct., who has been at the forefront of Democrats' efforts to
tackle the financial meltdown, has been lobbying for weeks for a
foreclosure mitigation measure to be included in the bill.
Dodd, the chairman of the Senate Banking Committee, and Sen.
Richard Durbin, D-Ill., the second-ranking Democrat in the Senate,
have been pushing the foreclosure measure aggressively.
The measure would give bankruptcy judges flexibility to
restructure the terms of people's loans who are going through a
bankruptcy proceeding to allow them keep their homes.
A similar bill was approved by the House Judiciary Committee
this week.
"Housing is a tremendous (economic) accelerator," Dodd said on
Thursday. "If you can generate activity in housing, the benefits of
that are phenomenal in terms of the credit markets."
Dodd said he was evaluating all the proposals that were being
floated, including those by Republicans.
Even though the House approved the stimulus legislation this
week, and the Senate is due to begin debating it from next week,
The realtors and home builders' lobby are continuing to push hard
for the inclusion of greater housing measures in the economic
recovery bill.
In a letter sent to all 100 senators Friday, the realtors
expressed disappointment that the draft Senate bill won't raise the
limits on the size of mortgages Fannie Mae (FNM) and Freddie Mac
(FRE) can buy - and that the Federal Housing Administration can
insure - in some costly housing markets.
The House-passed stimulus package would restore the limits to
nearly $730,000, the level that was in force during most of 2008.
On Jan. 1, they fell back to $625,500.
The drop in the high-cost limit has pushed up rates on larger
mortgages that no longer qualify for purchase by Fannie or Freddie.
Interest rates on "conforming" loans - those that can be sold to
Fannie or Freddie - are much lower than on larger loans, known as
"jumbos."
The realtors contend the situation is causing a drag on the
economy. "Without affordable financing, families are unable to
purchase or refinance homes, which will continue to prolong our
housing crisis," NAR President Charles McMillan said in the
letter.
-By Corey Boles, Dow Jones Newswires; 202-862-6601;
corey.boles@dowjones.com
-By Jessica Holzer, Michael R. Crittenden and Martin Vaughan
contributed to this article.
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