After weeks of gridlock – and a presidential veto threat – the Senate passed a bipartisan housing package Thursday that Democratic leaders say President Bush will sign.
The $15 billion Senate package includes tax breaks for home builders and homeowners, $100 million to boost mortgage counseling for families, and $4 billion in block grants for communities to purchase and rehabilitate foreclosed properties.
It's one of several measures now on a fast track on Capitol Hill to show voters that Congress is capable of responding to a deepening housing crisis now affecting financial markets across the world.
To get to a yes, Democrats dropped features that would have delivered more relief directly to families facing foreclosure, such as giving bankruptcy judges authority to restructure primary home mortgages.
"There is a tolerance level for what the Senate will do. I got as close as I could get," said Sen. Christopher Dodd (D) of Connecticut, who chairs the Banking, Housing and Urban Affairs Committee. He and the senior Republican on the panel, Sen. Richard Shelby of Alabama, worked out a bipartisan agreement, then sustained it on the floor of the Senate.
Meanwhile, House Democrats are moving their own versions of housing reform on parallel tracks. On Wednesday, the Ways and Means Committee voted out a $11.1 billion tax bill that targets help for low-income renters and new homebuyers.
But the most ambitious effort is unfolding in the House Financial Services Committee, where Chairman Barney Frank (D) of Massachusetts is working up a comprehensive housing reform. He is collaborating with both Senator Dodd and Treasury Secretary Henry Paulson, and consulting widely with industry and consumer groups, in the run-up to a committee markup expected in two weeks.
At the heart of Representative Frank's proposal is an expanded role for the Federal Housing Administration in stabilizing housing markets and helping families stay in their homes. The draft bill gives the FHA authority to guarantee up to $300 billion in refinanced subprime loans, if the lenders agree to reduce the outstanding principal on those loans.
"Our funds are inadequate to deal with the huge scope of the home mortgage crises," said Doug Garver, executive director of the Ohio Housing Finance Agency, at a Financial Services panel hearing Thursday. He described Ohio as "the epicenter of the housing crisis."
Early on, Frank considered proposing a new agency to deal with the housing crisis but concluded that the crisis was so severe that there was no time to ramp up a new bureaucracy.
In a surprise move Wednesday, the Bush administration signaled that it is expanding FHA authority to refinance up to 500,000 homeowners facing foreclosure. "To date, we have served more than 150,000 homeowners in need, and our projections show that we will likely reach more than 400,000 families by year's end," said Brian Montgomery, assistant secretary for housing at the Department of Housing and Urban Development, at a hearing before the Financial Services panel on Wednesday.
Leadership aides on both sides of the aisle say there is no plan yet for how to reconcile these various bills. "Barney Frank has a much bigger majority in committee and in the House than I do," says Dodd, who describes Thursday's vote in the Senate as "just a first step."