With consumer confidence at its lowest levels in 16 years and new reports that the housing market is continuing its downward spiral, politicians in Washington have been eager to clip on their capes and rescue the floundering market. By a vote of 83 to 9, the Senate agreed to end debate on a housing assistance bill and move to a final vote, which could come in the next couple of weeks.

The housing aid bill, which first
passed the House in May, would create an affordable housing fund, financed by Fannie Mae and Freddie Mac, the government-sponsored financial institutions that purchase mortgages from lenders. In the first year after final approval of the legislation, the fund would provide about $500 million for a foreclosure-rescue campaign.

The mortgage aid plan would also let the Federal Housing Administration (FHA) back $300 billion in new, cheaper fixed-rate home loans for an estimated 400,000 distressed borrowers, who otherwise would be considered too financially risky to qualify for government-insured, fixed-rate loans. Under both the House and Senate plans, lenders could limit their losses from potential foreclosures by agreeing to reduce the principal balances of loans at risk of default.

To help boosts home buyer confidence, the bill would provide $14.5 billion in an array of tax breaks, including a credit of up to $8,000 for first-time home buyers who purchase in the next year. And it would raise low-income tax credits and mortgage revenue bonds.

The New York Times reported that just before the House approved its rescue plan last month, President Bush threatened to veto it, saying it would put taxpayers’ money at risk and “reward speculators and lenders.” However, the margin by which the House approved its measure, while substantial, did not reach the two-thirds majority needed to override a veto.

But the bill may not be completely dead when it hits the president’s desk. According to an Associated Press report, lawmakers have been negotiating behind the scenes with the Bush administration to avert a veto. Dana Perino, the White House spokeswoman, told reporters the Senate measure has “some really good aspects” and Congress is “on the right path.”

Do you think the bill rewards speculators and lenders?

Got hot local housing tips or a story you want to share? Contact Amy Le at openingdoorsblog@homescape.com.