Senate Seeks to Assuage Home Mortgage Crisis

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The Senate voted to move ahead on a bill that would let states issue bonds for refinancing subprime loans. But it's unclear whether the legislation's centerpiece — a provision to allow bankruptcy courts to rewrite mortgage terms — will survive debate.


Today in the Senate, Republicans and Democrats came together in a rare show of bipartisanship. They agreed to find a compromise plan by tomorrow to help homeowners caught in the housing crisis. In February, Republicans blocked a measure drafted by Democrats.

As NPR's Brian Naylor reported just moments before a vote on that bill, party leaders announced their effort to compromise.

BRIAN NAYLOR: It was an unusual occasion to see the Democratic and Republican leaders standing side by side before microphones outside the Senate chamber so much so that Majority Leader Harry Reid took pains to reassure gathered reporters it was not a prank.

Senator HARRY REID (Democrat, Nevada; Senate Majority Leader): Everybody, this is not April Fools'. This is serious business.

NAYLOR: The serious business that brought Senators together is the housing crisis. Few states have escaped the rising tide of foreclosures, which has also hurt home builders, and of course, bankers. But until today, senators had pursued separate partisan paths. Democrats crafted a housing bill this past winter, including a controversial provision that would have let bankruptcy courts lower the mortgage payments of homeowners facing foreclosure.

But it was strongly opposed by mortgage bankers and the Bush administration, and Republicans blocked it. But then came the $30 billion rescue of the investment bank Bear Stearns engineered by the Federal Reserve. Suddenly, both parties came to the realization it was time to come to the rescue of middle-income homeowners.

Majority Leader Reid.

Sen. REID: This is important. I think the picture that we have here says it all. This is a crisis that we have. The only way it's going to be solved is working together. We can both go and do our separate press availabilities and beat up on the other. The time has come for us to legislate, not continue our bickering.

NAYLOR: It would be left to the Senate Banking Committee Chairman Chris Dodd, a Connecticut Democrat, and the senior Republican on the panel, Richard Shelby of Alabama, to draft the bipartisan bill. Reid gave them until midday tomorrow to come up with the package. Dodd said restoring the confidence of homeowners and the financial services industry is the most important priority.

Senator CHRIS DODD (Democrat, Connecticut; Chairman, Senate Banking Committee): Inaction is not an option. Failure is not an option. And what we're going to propose here we hope will be a positive and constructive set of ideas.

NAYLOR: The measure is likely to include the less controversial provisions from the earlier Democratic bill. Among them: Allowing states to float bonds to refinance subprime loans, giving tax breaks to homebuilders and other businesses hurt by the housing crisis, money for mortgage counseling, and to allow states to buy and refurbish foreclosed homes. Senators will also be able to offer amendments. Democrats are likely to try to attach a modified bankruptcy court provision to the bill. Republicans are expected to offer a proposal to give tax credits to individuals who buy and fix up foreclosed homes.

The important thing, says Tennessee Republican Lamar Alexander, is to show voters lawmakers are working together.

Senator LAMAR ALEXANDER (Republican, Tennessee): People hate it when they perceive us as just bickering and playing kindergarten politics instead of working on big issues. So, I think, this is good for the country and it's good for the senators who are being involved politically.

NAYLOR: The bipartisan housing effort is not without precedent. Earlier this year, lawmakers came together in a matter of weeks to draft and approve an economic stimulus bill. Today, with the prospect of thousands of homeowners facing foreclosure each day, at least for now party leaders believe working together on housing is a political necessity.

Brian Naylor, NPR News, the Capitol.

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