Senate Democrats and Republicans have agreed on a plan to resurrect a dismal housing market. But, before a vote can even be taken, many are questioning if it will work and if the plan unfairly helps some of the big companies whom they blame for the housing mess.
One of the biggest provisions — costing taxpayers an estimated $6 billion — would allow builders and others in the housing business to count their losses this year and in 2009 against the big profits they made as far back as 2004.
"I can't really imagine what Congress thought putting that in there. It's basically a handout to the builders and the mortgage industry," said Dean Baker, co-director of the Center for Economic and Policy Research, a liberal-leaning think tank. "To my mind, those are two of the big villains in this story and why you would be looking to give them a tax break at this point, I just can't really understand. That part is of no help."
And what about those millions of homeowners struggling to pay their mortgages? Well, there's not too much in the package for them.
"It's very hard to see how it provides any help at all," Baker said. "I think you would be probably very frustrated if you expected to get any help out of Congress."
Lawmakers did include $4 billion worth of grants for cities and towns to buy and maintain foreclosed properties. They can either rent them out or sell the homes. The idea is to avoid having neighborhoods filled with boarded-up houses.
Having such homes on your block can dramatically lower the value of your property.
To encourage Americans to buy these vacant homes or newly-built, but vacant homes, Congress is also proposing a $7,000 tax break for such buyers.
While this would create an incentive to buy such homes, some people fear that it would lower the value of all other types of properties, actually causing more problems.
To directly help homeowners facing foreclosure, $100 million would be allocated for counselors to seek out families at risk and review their finances.
One controversial proposal that would have directly helped some homeowners ended up being cut as the two parties negotiated the deal. The plan originally called for giving new powers to bankruptcy court judges to re-open mortgage agreements.
If somebody was struggling because their mortgage was about to reset to a higher rate, the judge could have theoretically locked in the mortgage at the existing, lower rate. While that might be good for the homeowner, many argued that it would set a dangerous precedent and would also hurt lenders and the investors who actually own the mortgage.
Kieran P. Quinn, chairman of the Mortgage Bankers Association, praised the senators "for putting aside partisan differences to craft a housing stimulus package that will keep at-risk borrowers in their homes."
Such provisions regarding bankruptcy judges must be kept out of the bill, Quinn also said in a statement.
"I hope that senators will keep their eye on that goal, and not attempt to attach to the bill partisan provisions such as bankruptcy cramdown that would increase borrowing costs on all future borrowers and delay progress on this important bill," Quinn said.
Alex J. Pollock, a resident fellow at conservative think tank The American Enterprise Institute, said that the homebuilders "certainly came out really well."
"You have to say the obvious recipients of help are the homebuilders, but on the other hand you can see why it would happen because the home-building industry is in a deep recession if not a depression," said Pollock, the former president and chief executive officer of the Federal Home Loan Bank of Chicago.
One key thing he sees missing from the legislation is a requirement for a clear disclosure of mortgage terms for borrowers.
"You ought to be able to tell people in one page what this mortgage means to them," Pollock said. "And what that really is: how much of my household income is paying this mortgage going to consume? That's the single most important thing you need to know in order not to do something really dumb, like get yourself into a mortgage you can't possibly afford."