Congress and the White House have agreed to a housing rescue bill aimed at helping struggling homeowners while throwing a financial lifeline to troubled mortgage lenders Fannie Mae and Freddie Mac.
The House voted to approve the measure Wednesday afternoon and the Senate is expected to follow by the end of the week.
Bush surprised many, including congressional Republicans, by dropping his threat to veto the legislation, which was based on his opposition to nearly $4 billion in federal grants included in the bill that would be provided to local governments to buy and refurbish foreclosed homes. Bush had said the grants amounted to a bailout for lenders and would encourage them to foreclose rather than work to refinance properties.
White House spokeswoman Dana Perino said Wednesday Bush dropped his objection in the interest of quickly moving a bill that includes new regulatory controls for the Fannie Mae and Freddie Mac. Congress next week is set to adjourn until the second week in September, and that factored into Bush’s decision as well, she said.
“But we also think it will have a positive impact on the overall economy, and that’s why the president has decided to sign the bill,” Perino said.
Republicans were angered by the news that Bush agreed to the plan. Many in the GOP considered the bill wasteful and a taxpayer bailout of the speculative lenders who helped bring about the subprime market crisis.
“American taxpayers, and struggling homeowners working hard to pay their mortgages on time each month, deserve much, much better,” House Minority Leader John Boehner, R-Ohio, said.
The bill is aimedat turning around the downward spiral in the housing market and giving the economy a boost.
One of the main provisions of the bill would allow some homeowners facing foreclosure the ability to refinance their homes with lower-cost, government-insured mortgages.
The bill would also create a fund to increase the stock of affordable housing for low-income individuals and families and provides a $7,500 tax credit for first-time homebuyers.
The legislation includes a provision that would grant the U.S. Treasury Department the authority to extend a line of credit to Fannie-Mae and Freddie Mac, which could end up costing taxpayers up to $25 billion, though Treasury Secretary Henry Paulson said there is less than a 50 percent chance federal intervention will be needed.
The assurance of government help is aimed at stabilizing the financial markets, legislators said.
“This legislation will show that we have our arms around the problem,” said Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking committee.
