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Bush Drops Opposition To Housing Rescue Bill

The Housing Bill

Congress is expected to vote this week on legislation that would address the housing crisis. Here, a look at what the bill would do.

President Bush on Wednesday reversed his stance and moved to back a congressional plan to help Fannie Mae and Freddie Mac weather the mortgage crisis and to provide struggling homeowners with more affordable loans.

White House press secretary Dana Perino said the president had decided it was not the time for a veto fight and would support the bill. The House was expected to vote on it Wednesday.

The bill would let the Treasury Department extend a line of credit to government-backed mortgage giants Fannie and Freddie and buy their stock. Officials say stabilizing the two institutions, which hold or back about half of the nation's mortgages, is critical for restoring confidence in the U.S. housing market.

The bill also would allow homeowners to refinance their mortgages with lower-rate, government-backed loans. It would provide $3.9 billion to help communities buy and rehabilitate foreclosed properties.

Treasury Secretary Henry Paulson said Wednesday that while the bill contains some "wasteful" provisions, it is nonetheless key to helping the nation turn the corner on the housing crisis.

"This is a very important message that we are sending to investors around the world," Paulson said.

Congressional analysts estimated Tuesday that the Fannie and Freddie rescue could cost $25 billion but that there's a better than even chance that it won't be needed at all.

Understanding The Housing Bill

The Senate is expected to clear a sweeping housing bill Saturday and send it to the president for his signature. The legislation would address the home-foreclosure crisis and shore up the government-sponsored mortgage giants Fannie Mae and Freddie Mac. The House passed the bill Wednesday by a vote of 272-152.

A look at what the bill would do:

— Give the Treasury Department the power to extend Fannie Mae and Freddie Mac an unspecified line of credit and to buy their stock, if necessary, to prop up the mortgage companies. The two companies back or own $5 trillion in U.S. mortgages — nearly half the nation's total.

— Allow qualified homeowners facing foreclosure to apply for lower fixed-rate, 30-year mortgages backed by loan guarantees from the Federal Housing Administration. The original lenders would have to agree to take a loss on their loans.

— Create an independent regulator to oversee Fannie Mae and Freddie Mac. The regulator could establish minimum capital requirements for the two companies and limits on their portfolios. It would also have approval power over the pay packages of Fannie Mae and Freddie Mac executives.

— Provide $3.9 billion in grants to communities with the highest foreclosure rates to buy foreclosed and abandoned properties.

— Give about $15 billion in housing tax breaks, including a credit of up to $7,500 for first-time homebuyers who bought homes between April 9, 2008, and July 1, 2009.

— Put a cap of $625,500 on the loans Fannie Mae and Freddie Mac can buy in certain high-priced areas, and a cap in other areas of up to 15 percent above the median home price.

— Count any federal infusion for the mortgage giants under the debt limit, essentially capping how much the government could spend to stabilize the companies without further approval from Congress. As of Tuesday, the national debt that counts toward the limit stood at about $9.5 trillion, roughly $360 billion below the statutory ceiling.

Material from The Associated Press was used in this report.