WASHINGTON – Homeowners struggling to make their house payments could get government mortgage relief under a rescue plan that seeks to revive the chaotic housing market and help reverse the economic downturn.
The Senate is expected Saturday to clear the wide-ranging legislation — considered the most significant housing measure in decades — for President Bush's signature, and the White House says he'll sign it quickly.
The bill gives the government power to throw troubled mortgage giants Fannie Mae and Freddie Mac a financial lifeline, in efforts to prevent the two pillars of the home loan market from going under and causing broader market turmoil.
It is designed to help an estimated 400,000 homeowners escape foreclosure by letting them refinance into more affordable loans backed by the Federal Housing Administration.
The Senate on Friday cleared the last hurdle to its passage on a 80-13 test vote that showed broad support for the election-year package.
Bush, who initially called it a burdensome bailout for irresponsible borrowers and lenders, dropped a threat to veto it this week after his Treasury Secretary, Henry M. Paulson, argued the backstop for Fannie and Freddie was vital to calming markets in the U.S. and abroad.
That was despite his opposition to $3.9 billion the bill sends to neighborhoods devastated by the housing crisis to buy and fix up foreclosed properties. The administration argues that would hurt homeowners by giving lenders an incentive to foreclose rather than help people stay in their homes.
Supporters called the bill a crucial and long-overdue response to the mortgage meltdown that would be a key ingredient to boosting the sagging economy.
"Unless we provide some type of footing for housing in the United States, I do not think that the economy will begin to recover. It is perhaps the most significant economic issue that we face," said Sen. Jack Reed, D-R.I. "This legislation is going to be the linchpin that helps millions of families have decent, safe and affordable housing."
Paulson's request for the emergency power to rescue Fannie and Freddie helped forge a bipartisan deal on the legislation, which also creates a new regulator with tighter controls on the government-sponsored mortgage firms — something Republicans have long sought.
Democrats also won key concessions as part of the compromise, including a permanent affordable housing program to be financed by Fannie and Freddie profits and the $3.9 billion in grants.
Many conservative Republicans are vehemently opposed to the foreclosure rescue, which they call a bailout of reckless homeowners and unscrupulous lenders. They are equally furious about the help for Fannie Mae and Freddie Mac, companies they say enjoy lavish profits in good times and wield their outsized political clout to resist regulation while depending on the government to bail them out should they falter.
Sen. Jim DeMint, R-S.C., slowed the measure's final passage because Democrats refused to allow a vote on his proposal barring the two mortgage companies from lobbying and making political contributions.