Two Parties’ Housing Crisis Solutions Vary
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WASHINGTON — While senators realize they need to address the nation’s housing-related economic crisis, Democrats and Republicans are divided over how to tackle the issue.
The Democratic bill being voted on yesterday blends several provisions aimed at easing the foreclosure crisis, such as providing $4 billion to communities to purchase and rehabilitate foreclosed homes and improving disclosure of subprime mortgage loans so borrowers won’t be surprised by big payment increases.
The underlying measure faces uncertain prospects as rival Democrats and Republicans spar over how freewheeling a debate to have on it. It seemed likely that Republicans would again block the bill, as they did February 28.
The White House, Republicans, and some Democrats are opposed to a plan to change bankruptcy laws to allow judges to cut interest rates and reduce what’s owed on troubled borrowers’ mortgages, saying it would force lenders to tighten their standards and raise interest rates.
“There is no way this proposal is going to fly,” the minority leader of the Senate, Mitch McConnell of Kentucky, said. “If Democrats want to help homeowners, they need to work with Republicans on proposals that will draw substantial bipartisan support.”
Democrats say they’re open to some options from the other side of the aisle, such as a bill by Senator Isackson of Georgia to award $15,000 tax credits to people who buy and move into foreclosed homes. That would sharply boost demand, Mr. Isackson says.
The measure could also serve as a vehicle for a plan by Senator Dodd of Connecticut, the Banking Committee chairman, to have the Federal Housing Administration guarantee hundreds of billions of dollars worth of refinanced loans if lenders reduce loan amounts to reflect reduced home values. The measure would force banks to make less money on the loans but would also reduce their credit exposure.
The White House says the $4 billion for purchases of foreclosed homes is too expensive and “would constitute a bailout for lenders and speculators, while doing little to help struggling homeowners.”
