WASHINGTON — Democrats’ plans to help hundreds of thousands of U.S. homeowners struggling with rising subprime mortgage rates and plummeting house values could be sidetracked by President George W. Bush’s threatened veto and the opposition of many congressional Republicans.
Opponents of the plan say more prudent homebuyers and renters should not 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, a Republican.
The Democratic-controlled House of Representatives 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.
Defying veto threats, the House voted to let the Federal Housing Administration take on up to US$300 billion (euro195 billion) in new mortgages so that financially strapped borrowers facing foreclosure could refinance.
The plan by Rep. Barney Frank, a Democrat, 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 US$290,000 (euro187,605) on a house now worth US$225,000 (euro145,555) 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 US$2,200 (euro1,425) to about US$1,200 (euro776).