Rs and Ds in the Senate have agreed on the basic framework for a new housing bill, according to the NYT. The basic framework appears to include the follwing:
- $100 million to expand counseling for homeowners at risk of defaulting on their loans
- tax-exempt bonds to let local housing agencies refinance subprime mortgages
- $4 billion in grants for local governments to buy foreclosed properties
- several tax provisions, including a credit of $7000 for purchasers of foreclosed properties that have been sitting vacant, and a break for struggling home-builders, allowing them to claim current losses against taxes paid in earlier, more profitable years
- a cap on mortgages insured by the Federal Housing Administration at $550,000 in the most expensive real estate markets. The cap had been $363k before Congress “temporarily” raised it to $730k as part of the Stimulus package passed in February.
So far, so good. No behemoth bailouts above. But there are two more contentious provisions being pitched by Democrats that are likely to be introduced as amendments:
- Connecticut Senator Chris Dodd wants the federal government to insure $400 billion in new loans for homeowners. Scary.
- Illinois Senator Dick Durbin wants to give bankruptcy judges the power to alter the terms of certain mortgages. Also very scary. This would raise the cost of mortgages for everyone else as lenders boost interest rates to compensate for future risk that loans could be written down by judicial fiat…..