WASHINGTON (Reuters) - The U.S. Senate on Thursday voted overwhelmingly to approve a $15 billion bill tackling the nation’s housing market crisis with tax breaks for corporations and some assistance for distressed homeowners.
The legislation is opposed by the White House, and has been criticized as too laden with business tax breaks by some lawmakers. The House of Representatives, where the bill will go next, is working on a narrower housing plan that focuses on tax breaks for homeowners.
Illinois Sen. Barack Obama, a Democratic presidential hopeful, said the Senate bill was a good start but didn’t go far enough.
“The heavy hand of special interests has again had too much influence on this bill,” Obama said. “Special interests have insisted on putting in unnecessary tax breaks for the profits enjoyed by home builders during their boom years, and on keeping out a change to our bankruptcy laws that would remove preferential treatment for mortgage lenders.”
At a cost of $15 billion over 10 years, the Senate bill would give a $6 billion tax break to home builders by temporarily extending a rule that lets businesses count current losses against taxes from prior profitable years.
The National Association of Home Builders in January took the unusual step of halting all congressional campaign contributions after a tax break like the one in the new housing bill was dropped from an earlier economic stimulus package.
Industry analysts said home builders such as Pulte Homes and KB Home would benefit from the proposed two-year extension of the net operating loss carry-back rule, which is not in the bill being developed by the House.
Shares of Pulte closed up nearly 3 percent to $14.42 while KB Home was up 0.8 percent at $24.72 at the close on the New York Stock Exchange.
The bill would also let money-losing companies accelerate use of accumulated tax credits for new business investments.
For homeowners, the Senate bill would raise the limit on the size of mortgages the Federal Housing Administration may insure, to $550,000. A $7,000 tax credit would be available to buyers of homes in or near foreclosure.
The bill would provide $180 million in added funding for counseling to help homeowners avoid foreclosure, as well as offer military service personnel special protections against foreclosure and more easily affordable mortgages.
The 28 million U.S. taxpayers who do not itemize on their federal taxes would get a standard deduction — $500 for single filers and $1,000 for joint filers — for property tax payments under the bill, which would also authorize issuance of $10 billion more in revenue bonds for mortgage financing.
However, a provision that would have revamped bankruptcy law to let judges ease mortgage payment terms for borrowers in Chapter 13 proceedings was dropped from the bill.
In Senate floor action, a measure to extend tax incentives for renewable energy production was tacked onto the bill.
Sen. Christopher Dodd, chairman of the Senate Banking Committee and chief sponsor of the legislation, called it “a major positive step in the right direction.”
But the Connecticut Democrat added: “We’ve got more work to do. We don’t do enough to prevent foreclosures.”
Dodd plans to hold hearings next week on an ambitious plan for the FHA to provide hundreds of billions of dollars more in guarantees to help refinance distressed mortgages that banks have written down.
In the House, Massachusetts Democratic Rep. Barney Frank is considering a similar FHA measure.
President George W. Bush on Wednesday offered a plan to insure mortgages for homeowners late on their payments, facing higher interest rates and seeing their homes lose value.
Home prices are expected to tumble 11 percent from 2007 to 2009, said Democratic Sen. Charles Schumer of New York.
“The White House continues to ignore the 800-pound gorilla in the room — the nation’s foreclosure and housing crisis is the central cause of this recession,” Schumer said. “Unless we address it quickly, millions of American families will continue to see their economic fortunes decline.”
Additional reporting by Thomas Ferraro; Editing by James Dalgleish