Congress approves housing bill
WASHINGTON (Reuters) - The U.S. Congress approved a massive housing market rescue bill on Saturday, offering emergency financing to mortgage titans Fannie Mae and Freddie Mac, and setting up a $300-billion fund to help hundreds of thousands of troubled homeowners.
Approved by the Senate in a 72-13 vote, the election-year rescue bill was passed by the House of Representatives on Wednesday. President George W. Bush was expected to sign it promptly, amid doubts about how much it would help.
With foreclosures at record levels, home sales sluggish and property values down, America is in its deepest housing slump since the Great Depression.
Fears that Fannie Mae and Freddie Mac, the largest U.S. mortgage companies, might collapse rattled global markets earlier this month and led the Bush administration to call for emergency measures to bolster investor confidence.
They recently lost billions of dollars on bad home loans and the stock market has whipsawed their share prices on uncertainty about whether they have enough capital.
Housing activists and scholars said this election-year bill will ease, but not end, the housing crisis.
"We have a housing market going into cardiac arrest. This bill is like CPR to stabilize the situation," said David Abromowitz, a senior fellow at the Center for American Progress, a think tank in Washington.
The National Community Reinvestment Coalition, an alliance of 600 community investment and development groups, estimated 2.5 million U.S. households will face foreclosure this year.
While Congress' legislation is welcome, the coalition said, it "will likely have little effect on the foreclosure crisis gripping the financial markets and economy."
HELP FOR FANNIE, FREDDIE
As private finance has retreated from the mortgage sector, the importance of Fannie Mae and Freddie Mac has grown, and they own or guarantee almost half the country's $12 trillion in outstanding home mortgage debt.
Under a provision put into the bill late in its development at the administration's urging, Fannie and Freddie could draw on a temporary line of U.S. Treasury credit or the government could buy shares in them, if they ran into trouble.
Texas Republican Sen. Kay Bailey Hutchison said the housing bill had positive aspects. But she added, "I am troubled by the inclusion of an unlimited U.S. Treasury credit line to Fannie Mae and Freddie Mac" and possible government stock purchases.
The bill establishes a $300-billion fund under the Federal Housing Administration to help distressed homeowners get more affordable, government-backed mortgages and get out from under exotic mortgages they cannot afford.
The success of the temporary fund will depend on lenders' willingness to accept losses on original loans to shift overstretched borrowers into new loans. An estimated 400,000 families could be helped by the program. Continued...
