Nevada Republicans bolt party line, support housing package

By Lisa Mascaro

Friday, May 9, 2008 | 2 a.m.

In a sign of how the mortgage crisis is rippling through Nevada and across the national political landscape, the state’s two Republican House members broke ranks with their party Thursday and defied President Bush’s veto threat to vote for the main provisions of a Democratic housing rescue package.

Republican Reps. Jon Porter and Dean Heller threw their lot in with Democrats. They joined dozens of other Republican lawmakers from mainly economically distressed states who crossed the aisle to vote for various elements of the package. Nevada has had the nation’s highest foreclosure rate for 15 months.

The loyalties of those lawmakers may face a tougher test in the weeks ahead. House and Senate negotiators must reconcile differences between versions of the legislation approved by each chamber. If the final bill still faces a veto threat, the Republicans will have to decide whether to vote to override Bush.

In a statement following the vote, Porter distanced himself from his party’s main argument that the bill would bail out scam artists and speculators at taxpayers’ expense.

“My constituents who have met their payment schedules and my constituents who are seeking assistance are all negatively impacted by the crash in housing prices,” Porter said. “The subprime mortgage crisis has been a major catalyst in triggering the economic challenges Nevada is facing.”

Democratic Rep. Shelley Berkley, who voted for all provisions of the package, said the bills are designed “to help ordinary working families who are in danger of losing their homes so they can keep a roof over their head.”

“You cannot have row after row of unoccupied homes in neighborhoods,” Berkley said in an interview. “It drives down values.”

The American Housing Rescue and Foreclosure Prevention Act includes multiple provisions to help homeowners refinance loans and to prop up the faltering housing market.

The bill’s key provision, backed by all three Nevada lawmakers, would allow the Federal Housing Authority to insure up to $300 billion in mortgages if private lenders are willing to take a loss. Lenders would have to write down the original loan to 85 percent of the current market value.

Only borrowers with owner-occupied homes would be eligible, and borrowers would also have to show they are spending 35 percent or more of their income on house payments. The legislation anticipates that about 500,000 loans would be written down.

Democrats say the restrictions would screen out investors who speculated on houses they intended to flip.

Opponents say lenders would use the program to save their riskiest investments first and are skeptical the restrictions would prevent speculators from getting help. Critics also have said taxpayers could be on the hook if these homeowners again get into trouble.

However, the nonpartisan Congressional Budget Office estimates the total potential cost at $2.7 billion, less than 1 percent of the value of mortgages able to be refinanced.

The bill also would provide first-time homebuyers with a $7,500 tax credit, which works like an interest-free loan to be repaid in 15 years, to keep the housing market from a deeper slump. It also includes a provision, mirroring one Porter authored, to allow state housing authorities to get into the refinancing business.

“While this bill is not perfect, it is an important step forward to help those who are struggling to make ends meet,” Heller said in a statement.

In a separate bill linked to the package but approved separately, communities could share $15 billion to buy foreclosed properties for resale or rent as a way to stabilize neighborhoods. Heller voted against this provision; Berkley and Porter voted for it.

Elliott Parker, an economics professor at the University of Nevada, Reno, said he understands the complaints of those who say taxpayers should not help buyers who overreached for homes they could not afford. But he said the package could aid Nevada, where home prices are continuing to drop, affecting the housing market and the state treasury.

“What people tend to forget about bubbles is they can happen downward, too,” Parker said, explaining the need to avoid letting prices dip so low that homes are undervalued. “The Great Depression was a great example” of a downward bubble, he said.

Thursday’s votes had been scheduled for the previous day, but were postponed after Republicans used a host of procedural maneuvers to stall the day’s agenda. Because they are in the minority, Republicans have little power to stop legislation. But they have various ways to force roll call votes — or, as they did Wednesday, spend time in a laborious process of changing their votes — to run the clock.

Republican leaders said they were not trying to stall the housing package, but were protesting the Democrats’ heavy-handed approach to the next item on the agenda — the Iraq spending bill. Republicans are upset that Democrats are not allowing the Iraq bill to be debated in committee or amended.

Porter, and to a lesser extent Heller, distanced themselves from their party’s protest. At least nine times Wednesday, Republicans asked for the House to adjourn — a stalling tactic that requires a vote. Heller voted to adjourn six times. Porter voted to stay in business every time.

Observers said Republicans who voted to keep working likely wanted to avoid the perception, in campaign attack ads, that they preferred to quit rather than help the country out of the mortgage meltdown. They also could be trying to boost their status as independent thinkers who don’t vote with their party at every step.

Porter’s and Heller’s decisions to break with their party are not a surprise considering the political climate they face in the fall, said UNR political science professor Eric Herzik.

Porter, especially, would have a tough time explaining to voters in his district, where he faces a difficult reelection, that he stood by his party instead of by Nevada homeowners.

“It’s no surprise that a Republican from Nevada, which is one of the hardest-hit states in the housing crisis ... would favor some sort of government interaction,” Herzik said. “For Republicans to simply say ‘no action’ puts Republicans in hard-hit states in a pretty uncomfortable position.”