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Macomb Daily
July 24, 2008 |
Chad Selweski
Staff Writer |
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House OKs Foreclosure Bill |
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Thousands of financially ailing homeowners in Macomb County and across Michigan could avoid foreclosures under a federal aid package that's moving quickly through Congress.
The House approved the election-year bill on Wednesday by a 272-152 margin and the Senate is expected to follow suit, perhaps before the end of the week. The legislation created a sharp disagreement between Macomb County's two representatives, with Democrat Sander Levin in favor and Republican Candice Miller opposed.
The legislation would help an estimated 400,000 homeowners nationwide trapped in mortgages they cannot afford on homes that have plummeted in value. They could escape foreclosure by refinancing into more affordable, fixed-rate loans backed by the Federal Housing Administration.
Lenders would have to agree to take a substantial loss on the existing loans, and in return, they would walk away with at least some payoff and avoid the often costly foreclosure process.
The measure would also help ease the credit crisis by preventing mortgage giants Fannie Mae and Freddie Mac from collapsing, extending to them billions of dollars in assistance.
Momentum for passage picked up mightily after President Bush earlier Wednesday dropped his opposition to the bill just hours before a scheduled vote in the House of Representatives. That put the legislation on track toward enactment as early as Friday. Bush's decision to sign the bill came despite his strong resistance to including $3.9 billion in the measure for neighborhoods hit hardest by foreclosures.
Those grants would provide $160 million to Michigan communities and nearly $15 million to municipalities in the 12th Congressional District -- southern Macomb and Oakland counties -- represented by Levin.
The aim is to allow cities and townships to purchase vacant, foreclosed homes, make improvements and then put them on the market. Supporters say that would help alleviate falling property values, neighborhood blight and crime.
"Earlier this year, I met with mayors and city managers of communities in my district, and they expressed an overwhelming need for federal action to alleviate this crisis," said Levin, a Royal Oak Democrat.
"Foreclosures not only affect those who lose their homes, they bring surrounding home values down for everyone.
The rise in vacant homes also leads to lower revenue for our communities. This crisis affects us all, and the need for action could not be more critical."
But Miller, a Harrison Township Republican, lashed out at Congress' eagerness to lend a hand to Fannie Mae and Freddie Mac and their high-paid executives, while ignoring the plight of struggling auto workers. The congresswoman said that Bush, by withdrawing his veto threat, seemed to bend to the wishes of "his Wall Street buddies."
"They (supporters of the bill) want to bail out these companies but the domestic auto industry is on its knees and we can't even get anyone to talk about helping them out. We just keep sticking it to them," she said.
"But every time a Wall Street paper pusher loses some money, we've got to rush in and bail them out."
There is "a lot of blame to go around" for the housing crisis, Miller added, but the legislation headed to the Senate would affect the "psyche of the nation" -- if consumers or companies make financial blunders, the government will step in to save them.
The Bush administration and lawmakers in both parties teamed to negotiate the measure, which pairs Democrats' top priorities -- federal help for homeowners facing foreclosure and $3.9 billion for devastated neighborhoods -- with Republicans' goal of reining in Fannie Mae and Freddie Mac. The measure is expected to reassure financial markets of the stability of the two quasi-government agencies, in which foreign investors hold millions of dollars of stock.
The measure hands the Treasury Department the power to extend the government-sponsored mortgage companies an unlimited line of credit and buy an unspecified amount of their stock, if necessary, to prop up Fannie Mae and Freddie Mac, two companies chartered by Congress. The firms back or own $5 trillion in U.S. mortgages -- nearly half the country's total.
In a policy statement on the bill, the White House said that parts of it "are too important to the stability of our nation's housing market, financial system, and the broader economy not to be enacted immediately."
According to RealtyTrac Inc., Macomb County's foreclosure rate ranks among the top 3 percent of all U.S. counties. The county broke records by posting more than 5,400 foreclosures last year. Michigan ranks fifth among the states and the Detroit area had the highest foreclosure rate among U.S. metropolitan areas.
Across the nation, foreclosure filings are up 53 percent in the past year.
Bush had objected to the neighborhood grants, saying that they would help bankers and lenders, not homeowners who are in trouble.
The administration's decision to avoid a showdown with Capitol Hill marked a striking split for Bush and congressional Republicans, many of whom are angrily opposed to the housing legislation, which they call a handout for irresponsible homeowners and unscrupulous lenders.
The package requires that lenders would have to lower the principal on revised loans to no more than 85% of current appraised value.
In the Senate, key members said they were ready to swiftly approve the bill without any changes.
"We'll be anxious to move this product along," said Sen. Christopher J. Dodd, a Democrat and the Banking Committee chairman.
At the Treasury Department, Secretary Henry Paulson said: "It is a strong message that we are sending to investors around the world and in the United States that we understand the importance of these organizations to our capital markets and to our housing markets." He said the legislation would play a key role in "helping us turn the corner" on the housing crisis.
Congressional analysts estimate that the mortgage giants' rescue could cost $25 billion, but predict there is a better than even chance it will not be needed at all.
The legislation would also:
Offer a tax credit to help first-time homebuyers make a down payment on a house.
Provide $10 billion in bonding authority that will allow for federal guarantees of tax-exempt bonds for state programs that help struggling homeowners refinance their mortgages.
Create a new regulator with tighter controls for Fannie Mae and Freddie Mac and modernize the FHA.
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