The Senate has come to an agreement on a bill aimed at plugging the gaping hole in the housing market, but the proposal is softer than legislation under consideration in the House, which could slow its path out of Congress.
Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., announced the agreement Wednesday, three days after returning from a two-week recess in which constituents pummeled Congress with their concerns over the housing crisis and its negative impact on the economy.
“This is a solid, bipartisan start to keeping families facing foreclosure in their homes, helping other families avoid foreclosures in the future and helping communities already harmed by foreclosure to recover,” Reid and McConnell said in a joint statement.
Reid called the plan “a robust package,” but it excluded aggressive steps opposed by the GOP, including one that would have allowed bankruptcy judges to reduce the mortgage principal owed by homeowners.
The bill would instead provide a two-year tax credit of $7,000 total to anyone who buys a foreclosed home. The bill also includes $4 billion for local governments to buy and restore foreclosed homes, Senate leadership aides said.
The tax credit amount is lower than the three-year, $15,000 tax credit proposal put forward by Georgia Republican Sen. Johnny Isakson.
Isakson said providing a tax credit to buyers of foreclosed homes “will be a significant catalyst to the marketplace solving a significant problem for the United States of America.”
Foreclosure is an imminent threat for millions of homeowners, many of them subprime borrowers who agreed to special loans with drastically rising interest rates that they are unable to pay.
The near-collapse of investment bank Bear Stearns due to the subprime mortgage crisis finally propelled the Senate to act.
“When you have an enormous crisis like this, Congress must work together to get this done,” said Sen. Amy Klobuchar, D-Minn.
But it is unclear whether the compromise will extend to the House, which has been crafting legislation that includes more ambitious steps to help borrowers. For instance, the Senate plan dropped language supported by Rep. Barney Frank, D-Mass., that would have allowed the Federal Housing Administration to insure some mortgages if lenders agreed to a smaller payment.
“On principle, the package is a good first step to help many Americans avoid foreclosure,” said Brendan Daly, spokesman for House Speaker Nancy Pelosi. “But we will need to review the details and fine-tune any specific provisions that need to be stronger.”
