A plan to help distressed homeowners and bank stuck with bad loans is being proposed in the Senate today, with bipartisan support. The House is planning his own version, and there is the threat of a White House veto if some significant changes are not made.
The Senate will possibly approve it by a wide majority. The main part of the new rules would allow FHA to guarantee up to $ 300 billion in new loans, which would help struggling homeowners to replace their existing loans with fixed and lower interest rates.
That would allow lenders to avoid costly foreclosures as long as they agree to take a sizeable loss on their troubled loans. .
The House version would apparently be known in a few days. A coordinate effort is being made between the House and the Senate to come up with a bill that would avoid President Bush’s veto. The Senate’s proposal would divert any possible losses from taxpayers to be covered instead by Fannie Mae and Freddie Mac profits.
Included are new government controls, monitoring and regulations on Fannie Mae, and Freddie Mac, as well as restructuring the Federal Housing Administration (FHA).A $ 8,000 tax break first-time homebuyers is also being considered. .
A difference between Senate and House plans is the cap on conventional and FHA loans, which could be set at between $625,000 and $ 730,000. Conservative Democrats in the House oppose the $ 3,9 billion the Senate is providing for the purchase and rehabilitation of foreclosed homes, unless it is accompanied by tax increases to cover it.
However a considerable number of Democrats, especially the members of the Black Caucus strongly support the measure which would prevent the downfall of many communities heavily hit by foreclosures. .This is also one of the points the White House is opposing and threatens with a veto, with the argument that it will bail out the same banks and lenders who are at the origin of the crisis.
Henry B. Nathan is a Florida Realtor at United Realty Group Inc.
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