In an about-face, Republicans push for cut-rate home loans in stimulus bill

Friday, Jan. 30, 2009 | 2 a.m.

Real Estate in Crisis

Associated Press: House OKs $819B stimulus bill with GOP opposition

Politics: The Early Line

Washington — It sounds too good to be true, and it just might be: 4 percent, 30-year, fixed-rate mortgage loans to buy or refinance houses, guaranteed by Uncle Sam.

What homeowner in Nevada wouldn’t sign up? Thirty-year fixed-rate loans are going for just over 5 percent, an excellent rate by modern standards.

The 4 percent loans are among several housing-related provisions Sen. John Ensign and Republican leaders in the U.S. Senate are developing as alternatives to President Barack Obama’s nearly $900 billion economic recovery plan now before them.

Republican senators are hoping to put a more lasting imprint on the bill than their House colleagues were able to achieve — the House bill passed this week without a single Republican vote. Republicans complain the bill is bloated with excessive spending that will do little to achieve its goal of stimulating the economy.

Adding a more robust housing component is one way to attract attention, especially in Nevada, which has steadily led the nation in rate of foreclosures.

Nationwide, 2.3 million homes were in foreclosure in 2008, with more expected this year.

“How many of you would like a 4 percent mortgage?” Ensign asked this week in floating the plan. “You have to fix housing; otherwise I don’t think the economy is going to recover from this.”

No details about a 4 percent program were available Thursday. Presumably, borrowers would be required to meet stringent loan requirements of the kind the lending industry reinstated in the aftermath of the meltdown from subprime mortgages, which required little documentation of income or other evidence of ability to pay.

But more homeowners can meet tougher loan standards if rates drop from 5 percent to 4 percent.

Ensign said Republicans are considering a three-pronged housing strategy that includes the government-backed low-rate mortgages, a $15,000 tax credit for homebuyers and a yet-to-be outlined program to help homeowners whose mortgages are upside-down, which means the home’s value is less than the loan balance. Home values in Las Vegas are now at pre-bubble 2003 levels.

The urgency in addressing the mortgage mess is something Democrats regard as an about-face for Republicans. Many in the party dragged their feet in the spring and summer as Congress was trying to pass a bill to bring relief to homeowners as housing prices began their free fall.

Ensign himself stalled the bill for weeks as he tried to attach a provision for tax credits for renewable energy developers. At one point during the standoff, Senate Majority Leader Harry Reid said thousands of homes a day were falling into foreclosure while Senate Republicans held up debate.

Ensign ultimately voted against the bill, the only member of the Nevada delegation in Washington to do so. (He had supported an earlier version.)

Ensign’s office at the time said most of the calls from constituents were from those opposing the bill. In voting no, Ensign said at the time: “This bill, I believe, is dumping the burden onto the taxpayer and bailing out a lot of irresponsible lenders.”

This week, Ensign said things have changed.

“We’re in a different time,” he said. The economic problems are real and the mortgage mess is creating a downward spiral that is pushing Republicans to take steps they normally would not consider. “A lot of us would not like to have nearly the government involvement even close to what it is right now,” Ensign said.

Though Obama’s American Recovery and Reinvestment Act includes some aid for homeowners, broader solutions are being considered outside the debate over the stimulus bill.

A separate House-passed bill pushes the Treasury Department to provide mortgage relief by using up to $100 billion from the $700 billion Wall Street rescue fund. The new Treasury Secretary, Timothy Geithner, signaled Wednesday he was working on a plan.

Washington’s main response to the mortgage crisis so far has been last year’s landmark housing bill, which created the Hope for Homeowners program. The program was expected to help 400,000 homeowners work with their banks to write down loans to more affordable levels.

The program has fallen short. A report to Congress last month said only 300 loans were being reworked. Congress and the Bush administration blamed each other for the shortcomings, with experts saying the program stumbled for a variety of reasons as lenders were reluctant to take losses and borrowers were unable to meet eligibility requirements.

Bert Ely, a banking consultant watching the debate, said ideas for a government-run program to offer low, fixed-rate mortgages surfaced late last year. But interest in it waned once the costs were considered.

Republicans were not able to provide a cost estimate Thursday.

“When you start getting into the numbers, you start to realize it would be very difficult to execute and could be quite expensive,” Ely said. “You’re talking about millions and millions of mortgages.”

Democrats are willing to consider the Republican proposals, a spokesman for Reid said.

However, Democrats add that the bill does have housing provisions, including a $7,500 tax credit for those buying homes.

In the House, Nevada’s lawmakers tried to boost the housing provisions in the stimulus package that passed Wednesday evening.

Republican Rep. Dean Heller offered an amendment in the Ways and Means Committee that would have enhanced the $7,500 tax credit for homebuyers — much the way the Senate Republicans are trying now to raise it to $15,000.

Heller won support from Rep. Shelley Berkley, the only Democrat to support it, but the amendment died in committee on a party line vote.

Discussion: 12 comments so far…

By ksand99

1/30/09 at 8:23 a.m.

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I think this would go a long way in helping move the economy forward. I'm happy Berkley and Heller worked together to try to get this added, and hopefully Reid and Ensign can work out a deal to have it added to the Senate version.

That is exactly the type of bipartisanship that Washington will need to get us back on track.
By neiman1

1/30/09 at 8:54 a.m.

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This works ONLY if some requirements for a mortgage are changed. The down payment can be required and the verification of income has to be there along with the mortgage only taking a set percentage of income. However, credit scores and prior repossessions must be dropped. People have hurt their credit through trying to make these unreasonable mortgage payments these last few years and eliminating them from the borrowing pool will not leave enough buyers to put a floor under the market. Without these provisions this will only help those who need it the least and will not put people back into homes.
By That_Anonymous_Guy

1/30/09 at 9:36 a.m.

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Sounds like a great idea, but there's one serious problem -- about half of Clark County's mortgages are now underwater. And these underwater mortgages are at the heart of the housing meltdown, as they are the likeliest to default.

If you don't qualify for the 4% loan without 20% equity, you won't address the root of the crisis.

But would the government be willing to give this loan to everyone, even if it means exposure to negative equity situations?

But if they can figure out all that, sign me up. I'd love to knock a couple of points off my mortgage.
By vc

1/30/09 at 9:41 a.m.

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I admit I am proud of the repubs on this one. I had lost all faith in Ensign before this.
By LasVegas2009

1/30/09 at 11:11 a.m.

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Hey and dont forget the $7,500 tax credit for buying a house now. I bought in October with the tax credit in mind. It was a loan to be paid back at $500 a year for 15 years but now the IRS is not going to ask for the money back. Under the new plan its become a gift. So now I get a $7500 credit and dont have to pay it back. Now if they go to 4% I will refinance also. Seems that buying a house in this down market has many benefits. The best being getting a $217,000 house for $80,000 and then $7500 off that now. Why would anyone rent now?
By kevjandon

1/30/09 at 11:30 a.m.

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This is some of the best news I've heard.

LasVegas2009
I thought the 7500 tax credit went away. What bill included it?
By thebs

1/30/09 at 11:34 a.m.

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Agreed vc, this makes me dislike Ensign a little less.

The tax credit is good until July, I believe.

"To qualify for the tax credit, a home purchase must occur on or after April 9, 2008 and before July 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs."
By LasVegas2009

1/30/09 at 11:35 a.m.

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kevjandon: It was in Obamas plan that passed the house just be sure to claim it on your taxes this year or if you buy now claim it next year. It is in turbo tax and h&R block tax cut. You have to be a first time buyer or not owned a home in three years. It is in every plan that has been put forth so you can count on it.
By kevjandon

1/30/09 at 12:58 p.m.

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Well crap.

I bought within the time frame but not a 1st time buyer. We went a year without owning a home so it looks like no deduction for me.
By perry161492

1/31/09 at 4:03 p.m.

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i always said fixed housing u fixed economy oh yea my mortgage lady has a preliminary hearing march 19.she is going on trial for mortgage fraud district attorney bring charges against her. do any1 has cindy birkland of sapphire mortgage who got screwed e mail me perry161492@yahoo.com. just courious
By nielenoelani

2/1/09 at 12:45 p.m.

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LasVegas2009, I believe you don't have to pay the credit back only if you bought in 2009. I bought in 2008 too, but unfortunately as far as I know, we'll still have to pay back the credit.
By perry161492

3/21/09 at 2:38 p.m.

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i hope new bankruptcy pass the senate it sound like reppubican people might fight it typical of them always looking out for the rich people not main street if it don't passed look for major foreclosure in this city this city falling fast and hard. i notice it start falling back in 2007 they should tookin care of this messed back then but last administration everything o.k up until october 2008 they knew it was messed

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