Mortgage Woes Unlikely to Be Cured by Congress

Want government help to get out of a bad subprime mortgage? Don't look for Congress to come to your rescue anytime soon.

Lawmakers have lots of ideas and plans — as well as hearings to share their concerns and assess blame — but there's no consensus on how to stop the foreclosures. The only thing everyone has agreed on is that something must be done.

"We may have as many as 1 million to 3 million people who could lose their homes, not because they lost their jobs, not because the economy collapsed, but because they got bad deals on mortgages," said Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking, Housing and Urban Affairs Committee.

House and Senate lawmakers are working on different plans to help Americans out of the mortgage crisis, none of which seems ready for a prime-time signing by President Bush. Dodd acknowledged as much last week as he urged the White House to take action, despite all the mortgage-related legislation his committee has planned for the fall.

"Those matters will take a little more time," Dodd said.

Time may be running out. Financial markets in the U.S. and around the globe have been shaken by fears about spreading credit problems that started with home mortgages. It began with rising defaults in subprime mortgages — home loans made to people with weak credit histories.

The rising delinquencies have jolted global credit markets because big hedge funds and other investors poured lots of money into risky subprime mortgages because of their higher returns and now face the prospect that they will not be repaid.

The House and Senate are working on different tracks but the plan furthest down the road is in the Senate, where senators will vote in September on the Transportation-Housing and Urban Development departments spending bill. Inside that bill is $100 million earmarked for nonprofit housing groups to help homeowners in refinancing.

Many mortgages are no long held at banks, so people don't know where to go when they start getting in trouble, senators said.

"First and foremost, we need people on the ground to help innocent mortgagors, innocent homeowners refinance when they're on the edge of foreclosure and yet they have the wherewithal for refinancing," said Sen. Charles Schumer, D-N.Y., who sits on the Senate Banking Committee. "Somebody's got to fill that void."

While the Senate is working on that, Rep. Barney Frank, chairman of the House Financial Services Committee, will hold a Sept. 5 inquiry on credit ratings agencies like Standard & Poor's Corp., Moody's Investors Service Inc. and Fitch Ratings. Such rating agencies have been criticized for not properly evaluating the risks of bonds backed by mortgages given to borrowers with weak credit.

President Bush, meanwhile, urged Congress on Friday to concentrate on reforming the Federal Housing Administration, a Depression-era agency created to help low and moderate-income Americans afford homes. The House passed a bill last year that would modernize the FHA, but a companion bill has yet to make it through the Senate.

That legislation is one of Dodd's priorities for the fall.

"We're looking at ways to deal with the credit rating agencies and FHA, which I had hoped we would have completed in July," Dodd said. "We'll hopefully bring that up as soon as we can with the return of the Congress in September."

However, even if it passes the Senate it would have to be reconciled with the House legislation before it can go to the White House for Bush's signature, a process that could take months.

Some Democrats also would like to see mortgage giants Fannie Mae and Freddie Mac — which are recovering from accounting scandals — play a larger role in the mortgage market. Some want to see the two companies buy "jumbo" mortgages of more than $417,000 in high cost areas in areas of the country where home costs are higher.

The House in May passed legislation that would do that. But the situation has worsened since then, and the legislation must be reworked, Frank said. "The current crisis in the mortgage market demonstrates we should raise it to a higher level," he said.

Most of the other bills are still in planning stages, like numerous measures to regulate and penalize mortgage lenders who engage in predatory lending. Schumer acknowledged, however, that it won't help anyone already suffering with a bad mortgage.

"This won't do anything about what happened in the past, but it will prevent the present crisis from getting worse, because mortgage brokers are still preying on these people," Schumer said.