Housing rescue up to $300 billion in mortgages

President drops veto threat of bill to offer up to $300 billion in mortgages and back up Fannie Mae and Freddie Mac. House vote expected Wednesday.

July 22 2008 - The House was poised Wednesday to pass sweeping legislation that will offer up to $300 billion in assistance to troubled homeowners and throw government support behind mortgage finance giants Fannie Mae and Freddie Mac.

The House is expected to approve the nearly 700-page measure on Wednesday afternoon. It could then go back to the Senate for a final vote as early as this evening, but it could take the Senate a few days to deal with the bill because of a Republican filibuster threat.

A spokesman for Sen. Jim DeMint, R-S.C., said the senator will filibuster the bill unless Democratic leaders allow him to offer an amendment banning political contributions and lobbying by Fannie Mae and Freddie Mac. DeMint does not expect Democratic leaders to agree to debate that amendment, a Democratic leadership aide said.

“To say we’ve got to pass it in 10 minutes on the floor without reading it, which is what they’re going to ask us to do, that’s not going to happen,” DeMint said.

Home prices have fallen more than 15% nationwide over the past year, according to S&P/Case-Shiller Home Price Index. More than 340,000 have had their homes repossessed by banks during the first six months of the year, up 136% from the same period in 2007. The number of homeowners who have become delinquent in their mortgage payments during the same period has risen to 1.4 million, up 56% from a year ago.

Fannie Mae and Freddie Mac

To help stabilize markets, which were shaken in the past few weeks by steep declines in the stock prices of Fannie Mae and Freddie Mac, Treasury Secretary Henry Paulson asked Congress on July 13 to give the Treasury broad, but temporary powers intended to provide a liquidity and capital “backstop” for the two companies.

Fannie and Freddie guarantee the purchase and trade of mortgages and own or back $5.2 trillion in mortgages.

Helping at-risk borrowers

The bill also aims to help homeowners at risk of foreclosure and to bolster regulation of Fannie and Freddie. Among other things, it would:

Increase the Federal Housing Administration’s role. The FHA could insure up to $300 billion in new 30-year fixed rate mortgages for at-risk borrowers in owner-occupied homes if their lenders agree to write down their loan balances to 90% of the current appraised value of their homes.

The bill allows Treasury over the next 18 months to offer Fannie and Freddie an unlimited line of credit and the authority to buy stock in the companies if necessary.
Housing rescue on fast-track to vote
by Jeanne Sahadi | CNNMoney.com