Housing aid bill faces veto

WASHINGTON - Democrats' plans to help hundreds of thousands of homeowners struggling with rising subprime mortgage rates and plummeting house values could be sidetracked by President Bush's threatened veto and the backing of many congressional Republicans.

Opponents of the plan say more prudent homebuyers and renters shouldn't be called upon to bail out borrowers who gambled on ever-rising housing prices and lost.
"The American people don't want to make their neighbor's payment when they're having trouble making their own," said Rep. Randy Neugebauer, R-Texas.

The Democratic-controlled House on Thursday passed a homeowner rescue plan that would provide cheaper, government-backed mortgages to half a million debt-ridden borrowers and bolster an economy crippled by the housing crisis. The House approved the measure by a vote of 266-154, with 39 Republicans - mostly from areas suffering worst from housing woes - supporting it.

Indiana 9th District Rep. Baron Hill said the House version of the package contains an additional standard deduction of up to $350 ($700 for joint filers), on top of the basic standard deduction, for state, local and real property taxes.

"I have heard from many constituents about how hard they have been hit by increased property taxes," Hill said. "And, as a homeowner in southern Indiana myself, I understand their concerns. My colleagues in Congress are also hearing about skyrocketing property taxes from their constituents and I am very pleased we were able to address this problem at the federal level."

Defying veto threats, the House voted to let the Federal Housing Administration take on up to $300 billion in new mortgages so that financially strapped borrowers facing foreclosure could refinance.

The plan by Rep. Barney Frank, D-Mass., is the centerpiece of a broader package of bills approved Thursday that Democrats say will prevent more foreclosures and help homeowners and communities deal with the fallout from the mortgage crisis.

The measure is targeted at homeowners facing default, including many who owe more than their houses are worth.

For instance, a homeowner who owes $290,000 on a house now worth $225,000 could refinance into an FHA-backed loan if the mortgage holder was willing to take a loss of about 36 percent. The borrower's monthly mortgage payments would fall from $2,200 to about $1,200.

Loan holders would have an incentive to participate, proponents believe, since the alternative would be costly foreclosures, which can involve losses of 50 percent or more.