Congress approves housing rescue plan
SAN FRANCISO (MarketWatch) -- Congress on Saturday passed a housing rescue bill designed to help more than 400,000 homeowners avoid foreclosure and President Bush is expected to sign the measure quickly.
The measure, approved by a 72-13 vote during a weekend session in the Senate, allows homeowners who cannot afford their monthly payments refinance into government-backed loans. The bill also offers temporary financial help to Fannie Mae and Freddie Mac
Lawmakers have been working for months on the massive housing bill that's been given new urgency by the Bush administration's plan to backstop Fannie (FNM) and Freddie (FRE), which have seen the value of their shares gyrate over concerns about their capital levels.
House Financial Services Committee Chairman Barney Frank, D-Mass., said the overall bill deals with a housing crisis brought about by "bad decisions and inaction and malfeasance from years before."
The bill includes such provisions as allowing the government to insure up to $300 billion in refinanced mortgages, establishing a tax break of as much as $7,500 for first-time homebuyers and creating a new regulator to oversee government-sponsored enterprises Fannie and Freddie.
The rescue plan would extend an unlimited line of credit to the two mortgage-finance giants for 18 months and give the Treasury the authority -- also for 18 months -- to buy Fannie and Freddie shares if the Treasury deems the companies' capital to be inadequate.
Some lawmakers have been skittish about the administration's plan for the GSEs, calling it a "blank check" that potentially puts U.S. taxpayers on the hook.
A Freddie Mac spokesman praised the bill in a statement last week.
"Passage of this bill sends a helpful signal of confidence to housing markets and investors. Freddie Mac will continue doing its part to help the economy by raising private capital, helping put families into homes through sound underwriting, and helping troubled borrowers avoid foreclosure," said Doug Duvall.
Fannie Mae CEO Daniel Mudd said "the legislation should reinforce confidence that the GSEs will be able to serve the housing finance system now and in the future."
On Tuesday, the Congressional Budget Office said the plan could cost the government up to $25 billion. However, the same report said chances are better than 50% that the government wouldn't need to help the companies out. See related story.
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