Senate Set to Approve Homeowner Rescue Package
STEVE INSKEEP, host:
It's MORNING EDITION from NPR News. Good morning. I'm Steve Inskeep.
Congress is trying to do something about the mortgage crisis without making it worse. Some newspaper editorials are starting to ask if that's possible, which is not stopping lawmakers from trying. Leaders of a Senate committee have agreed to set up a rescue fund for people at risk of losing their homes.
The committee votes today, and NPR's Jim Zarroli is covering the story. Jim, good morning.
JIM ZARROLI: Good morning.
INSKEEP: Okay. So, you want to help people who need it and deserve it, which may be a lot of people, but you don't want to help people who don't need it, don't deserve it, which may be a lot of people. What is the Senate going to do to try to thread that needle?
ZARROLI: Yeah, well, that is part of the challenge of writing this bill. The bill would basically set up a $300 billion fund to guarantee mortgages. So, let's say someone's falling behind on his mortgage payments. The person goes to the bank, wants to refinance. Now, normally, depending on what that person's credit is like, the bank might not want to do that.
But under this bill, the federal government would come in at that point and say to the lender, if you'll refinance and you'll forgive part of the loan balance, we will guarantee the payments on the loans. Lenders like this because, you know, they no longer have the risk and they don't have to foreclose. And, of course, the borrowers like it because they get to stay in their homes.
INSKEEP: Doesn't the federal government then end up on the hook for a large part of that mortgage? Not the whole thing, because some of it is forgiven, but a whole lot of mortgage - $300 billion worth.
ZARROLI: Well, that was the initial question. And that, in fact, was one of the problems with the House-passed version of this bill that was passed last week. That would have guaranteed the loans by - that would have basically had the Federal Housing Administration guarantee the mortgages, and a lot of conservatives didn't like that.
This bill is somewhat different because the money to guarantee the mortgages would come from a different source. It would come from funds set aside for affordable mortgage programs by Fannie Mae and Freddie Mac, which are the big government-sponsored mortgage companies.
Now, the committee had - say that, in this way, taxpayers wouldn't be on the hook quite in such a direct way. The senators say that this should be acceptable to both parties in a way that the House version of the bill wasn't.
INSKEEP: So you still do have homeowners who could be relieved here and some lenders who could end up being relieved, which leads to the next question. Is this proposal likely to become law?
ZARROLI: Well, the question, of course, is whether it gets through Congress and also whether the White House is going to sign it. The White House said yesterday that they're looking at the details, and until then, they're reserving judgment. One of the important things that the bill does is set up an independent monitor for Fannie Mae and Freddie Mac.
A lot of people, but especially conservatives, have always said that these are big powerful institutions, they'd like to see them regulated more tightly. They say they've got a long history of being poorly managed, so that was something that was put in the bill to draw in more Republicans. President Bush says he likes the idea. He also said yesterday he doesn't think taxpayer money should be used to help what he calls greedy lenders and speculators.
So it's not clear where he stands.
INSKEEP: Okay, Jim. Thanks very much.
ZARROLI: You're welcome.
INSKEEP: That's NPR's Jim Zarroli, tracking a plan to give $300 billion in loan guarantees if lenders are able to change the terms and reduce the size of some troubled mortgages.
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