Congress goes extra mile for homeowners

By Lisa Mascaro

Sunday, May 4, 2008 | 2 a.m.

Even as $600 rebate checks to fend off a recession are landing in mailboxes, Congress knows they won’t be enough to halt the mortgage meltdown.

Nevada saw another 7,000 foreclosures in March, ensuring the state’s status as the capital of the housing crisis. Nevada has had the highest foreclosure rate in the nation for 15 consecutive months.

Even the state’s conservative Republican politicians, who are generally unwilling to ask the government to interfere with market economics, are now willing to do so.

Republican Rep. Dean Heller, breaking rank with his party last week on the House Financial Services Committee, wants the federal government to rewrite mortgage loans, with taxpayer backing.

A bill to allow that is headed to the House floor as a signature element in the Democrats’ housing relief package. Heller was among 10 members — one-third of the committee’s Republicans — to cross the aisle to help homeowners. In a state where one in 139 homes is in foreclosure, it’s hard to hew to the party line.

“Everyone is under political constraints to do something, and we’re going to have to do it pretty soon,” said Dana Chasin, a senior adviser at OMB Watch, a progressive policy institute.

“Maybe there’s a principled objection,” he said about dissenters, “but how many people in the Nevada environment are going to be interested in a statement of principle? It’s getting, week by week, to be more of a no-brainer. Every single week the numbers get starker and starker.”

The Bush administration remains cool to Congress’ housing bills. President Bush has said he cannot support the Senate-passed bill and has raised objections to the bill Heller and others approved last week in the House committee. He presses his own programs, which are helping smaller numbers of homeowners to refinance.

Republicans worry taxpayers will be on the hook for the newly refinanced mortgages. If borrowers default on their new loans, the Treasury will be liable.

But even more, critics worry about the message the government is sending to those who made bad decisions to buy homes they could not afford. Nevada, especially Las Vegas, certainly had its share of speculators rushing in to scoop up properties during the housing boom. Critics oppose what they see as a bailout.

Kevin Smith, a spokesman for House Minority Leader John Boehner of Ohio, said the bill now making its way to the House floor “goes too far in helping people who acted irresponsibly — speculators and scam artists — at the expense of taxpayers who are making all of their mortgage payments and paying all of their taxes on time.”

The bill, the FHA Housing and Homeowner Retention Act, would allow the Federal Housing Administration to refinance up to $300 billion in mortgages nationwide for families that can show their payments are consuming 35 percent or more of their income.

Under the program, lenders would be repaid up to 85 percent of the home’s current value, and eat the loss. Only owner-occupied homes that were purchased before January would qualify, and families would have to prove they possess no other properties.

When homeowners eventually sell, they would have to share with the government a portion of any profits they make or pay a loan exit fee based on 3 percent of the loan balance. The program would run for two years.

The FHA bill will be the centerpiece of a far-reaching housing package to be debated this week. The package will include bills to modernize the FHA as well as tax provisions that include a $7,500 refundable tax credit for first-time homebuyers, and a provision, similar to one authored by Republican Rep. Jon Porter, to allow community housing authorities to get into the refinancing business. Separately, the House will vote on a proposal to give communities $15 billion to buy foreclosed properties.

Democratic Rep. Shelley Berkley, who supported the tax provisions from her seat on the House Ways and Means Committee, said the housing package “is perhaps one of the most important pieces of legislation to help the homeowners in Southern Nevada and throughout the state of Nevada.

“Any relief we can provide people who are losing their homes and people who are unable to make their mortgage payment ... will be a great benefit.”

Addressing critics who call it a bailout, she said, “We’re bailing America out.”

Porter also supported the tax provisions as a member of the Ways and Means Committee, but he could not yet say whether he would support the broader package.

When Heller crossed the political aisle to vote for the FHA bill in committee, he joined other Republican lawmakers from states also hit hard by the housing crisis. It is unclear whether the package would have enough votes to withstand a Bush veto.

Heller did not respond to repeated inquiries for his views on his vote.

But fellow Financial Services Committee member Rep. Scott Garrett of New Jersey, a leader in the Republican Study Committee, had argued against the bill, saying a dozen steps have already been taken by Congress and the administration to help homeowners through the crisis.

Garrett said his colleagues who voted for the plan “may have done it for more local reasons ... They may see the need to go back home and say they’ve done the 13th thing now.”