WASHINGTON – Conservative Republicans in the Senate were seeking to slow the completion of an election-year housing rescue designed to help hundreds of thousands of homeowners avoid foreclosure and boost lawmakers' standing with voters.
Sen. Tom Coburn, R-Okla., said Wednesday he was working on ways to stop the bill, which he said would "reward stupidity on the part of people who bought homes they couldn't afford."
Amid rising foreclosures and growing public anxiety about the sagging economy, Democrats and many Republicans were eager to push the bill through the Senate and could begin voting on it as early as Thursday. They hoped to send the bill to President Bush before Congress breaks for a weeklong July 4th vacation.
However, a group of conservative Republicans, including Coburn, threatened to block the measure in light of allegations that Banking Committee Chairman Chris Dodd, D-Conn., one of its architects, and Budget Committee Chairman Kent Conrad, D-N.D., received preferential mortgages from Countrywide Financial Corp. through a special program for friends of the embattled firm's CEO.
Nine conservative GOP senators wrote to Senate Majority Leader Harry Reid, D-Nev., requesting that he delay consideration of the housing measure until they could review it and "better understand the allegations and how much Countrywide will benefit from the bill."
The centerpiece of the package is a foreclosure rescue program that would have the Federal Housing Administration back $300 billion in new, cheaper mortgages for distressed homeowners who otherwise would be considered too financially risky to qualify for government-insured, fixed-rate loans.
Borrowers would be eligible if their mortgage holders were willing to take a substantial loss and allow them to refinance, and would ultimately have to share with the government a portion of any profits they made from selling or refinancing their properties.
The measure is designed to help hundreds of thousands of borrowers in danger of losing their homes, but it would also benefit mortgage holders by allowing them to avoid costly foreclosures and reclaim some of what they're owed by people facing financial ruin.
The bill tightens controls on government-sponsored mortgage giants Fannie Mae and Freddie Mac — which provide huge amounts of cash flow to the mortgage market by buying home loans from banks — creating a new regulator for the firms.
It provides a $14.5 billion array of housing and other tax breaks, including a credit of up to $8,000 for first-time homebuyers who buy a home in the next year and boosts in low-income tax credits and mortgage revenue bonds.
Tax-writers toiled Wednesday to find ways of covering the costs of those proposals — seen as crucial to drawing support among conservative Blue Dog House Democrats who insist that the measure shouldn't add to the deficit. The Senate plan comes up $2.4 billion short.
Blue Dogs also were demanding that $4 billion in grants to buy and rehabilitate foreclosed properties be covered by cuts elsewhere.
Leaders had hoped to speed the measure to Bush in a form that could avert his promised veto, but Republicans' desire to highlight the Countrywide fiasco and Democrats' differences on the complicated bill were threatening to frustrate those plans.
Rep. Barney Frank, D-Mass., the Financial Services Committee chairman, said he and other Democrats have a number of objections, including to the bill's immediate effective date.
Frank and House Speaker Nancy Pelosi, D-Calif., argued that the new regulations for Fannie and Freddie should wait six months before going into effect.
"It's very disruptive to do them immediately," Frank said.
That would leave it to the next president to name a new regulator.
House Democrats also wanted higher limits — about $730,000 — on the mortgages the firms can buy and hold than the Senate measure, which caps them at $625,000. They're opposed to restrictions on the companies' investment portfolios, which prevent them from holding so-called "jumbo" loans larger than those limits — potentially obliterating their ability to buy such mortgages.
Frank had reservations about using money from an affordable-housing fund to cover the potential cost of the FHA rescue — a key concession Senate Democrats made to draw GOP support. Frank's measure had earmarked about $500 million of that money to pay for housing for victims of Hurricane Katrina, and he said he was looking for ways to ensure the housing bill helped them.
"I do not think that we should stiff the victims of Katrina once again," Frank said.