WASHINGTON — After more than two days of debate the House Financial Services Committee approved a foreclosure prevention bill 46 to 21 on Thursday that was largely unchanged from the bill Chairman Barney Frank introduced two weeks ago.
The bill is meant to calm the housing market and stem foreclosures. Though it is hard to gauge how much of a dent it will make in the roughly 2 million foreclosures expected through next year, Rep. Frank said the legislation is the best Congress can do, given the problem's complexity.
"You figure out what's the best you can do, and you do it," said the Massachusetts Democrat after the bill gained the support of 10 Republicans but failed to sway the panel's No. 1 GOP lawmaker, Rep. Spencer Bachus. "Given the constraints over existing contracts and what our jurisdiction is … this is the best thing we can think of," he said.
The bill would create a temporary program to let the Federal Housing Administration insure loans worth more than a home's value after lenders agree to write down the loan to at least 15% below current market value. Rep. Frank said he is not finished addressing the housing situation but declined to say what would come next. The bill is on course to be taken up by the House next week.
Senate Banking Committee Chairman Chris Dodd, who is pushing a similar Senate bill, has planned a vote on it by his panel Tuesday along with legislation to reform the regulation of the government-sponsored enterprises.
Ultimately, the goal of Democratic leaders is for both chambers to agree on housing measures including the FHA refinancing plan, FHA modernization, GSE reform, funding for states and local housing authorities to buy foreclosed homes, and tax breaks. But Rep. Frank said it is too soon to tell exactly how this will play out.
During debate on the FHA refinancing proposal in Rep. Frank's committee, which began last week, Republicans focused on scuttling the bill or narrowing its scope but succeeded only on marginal issues.
As amended, the bill would tighten the parameters for potential beneficiaries by forbidding mortgage fraudsters or those unable to document their income from qualifying.
The refinancing program would expire in two years, but an oversight board comprising the heads of the Treasury Department, Federal Reserve Board, and Housing and Urban Development Department would have leeway to extend it for up to two years.
Investors and lenders have welcomed the program as an addition to other loan-mitigation avenues but have been circumspect on how ready they are to accept such losses.
