Senate Close to Passing Housing Rescue

On the same day a new report showed a record drop in U.S. home sales, a hard-fought housing rescue package passed a critical test in the Senate.

Last month, more than a quarter million homes were either repossessed, put up for auction or declared in default, according to RealtyTrac.

Eighty-three senators voted to limit debate on the bill, which was negotiated on a bipartisan basis over months this year. That is more than enough to overturn a promised veto of the bill by President Bush, and clears the bill for a final vote.

That could come late tonight or tomorrow. But the measure then faces a more difficult crowd in the House of Representatives.

"This bill puts a tourniquet on the hemorrhaging of foreclosures," said Sen. Chris Dodd, D-Conn., who chairs the Senate banking committee and helped wrangle the compromise legislation with his Republican counterpart, Sen. Richard Shelby of Alabama.

Dodd said he was not entirely happy with the bill, but felt like it was the best compromise possible between Republicans and Democrats.

The bill seeks to throw a government-backed life preserver to some homeowners with subprime loans in danger of foreclosure.

Lenders have to agree to lower the value of in-danger loans (losing some money on them), and if the government agrees to back the newly discounted mortgages in case of default, the FHA would have to buy the mortgages. The program could grow to cover up to $300 billion in refinanced mortgages.

In addition, the bill address the foreclosure crisis by providing $4 billion in grants to local communities to buy and maintain foreclosure properties and give some first-time homeowners an $8,000 tax credit for buying a foreclosure property to live in.

More generally, it would enact long-sought tougher regulations for the private, government-backed lenders Fannie Mae and Freddie Mac and raise maximum loan limits, currently at $417,000, for those enterprises in areas where housing prices are much higher.

President Bush opposes the voluntary government backing of refinanced sub-prime loans and has said he will veto the bill.

Sen. Mike Enzi of Wyoming, the ranking Republican on the Senate Housing, Education, Labor and Pensions Committee, agrees with the president on this point.

"It would move the highest risk, worst investment loans onto the backs of the American taxpayer and provide a bailout to banks that made unwise investment choices," Enzi said on the Senate floor.

The bill faces an uncertain future in the House, where fiscally minded Democrats, known as Blue Dogs, want the $4 billion in grants accounted for with budget cuts elsewhere.

Republicans in the House may be more entrenched against the bill, too. A new House Member, Rep. Laura Richardson, D-Calif, who won a special election to fill the seat vacated by the death of Rep. Juanita Millender-McDonald, lost a house she bought in Sacramento to foreclosure when she stopped making payments.

More accusations of Richardson's lack of financial acumen have emerged, including a report in the Long Beach Press-Telegram that she abandoned a car at an auto shop rather than pay for repairs.

A spokesman for House Minority Leader John Boehner of Ohio e-mailed a story about Richardson to reporters and described the Senate housing package as "legislation that would waste taxpayer money by giving a bailout to reckless and irresponsible lenders like Rep. Richardson."

Add the Richardson foreclosure debacle to reports that Dodd and another important Senate Democrat, Sen. Kent Conrad of North Dakota, were both given special deals on their loans with Countrywide, the country's largest lender.

Both senators maintain they did not ask for special treatment and argue the loans they received were competitive with market rates at the time. Conrad has said he will cut a check to charity for $10,500, equal to the unsolicited discount he got from Countrywide, taking a point off his million-dollar loan.