Housing rescue bill heads to Bush for signature

WASHINGTON — Congress passed the most significant housing legislation in decades Saturday, offering help to struggling homeowners and seeking to stabilize a troubled housing market that has dragged down the economy.

President Bush will sign it quickly, the White House said, despite reservations over $3.9 billion in the bill that would aid neighborhoods devastated by the housing crisis buy and fix up foreclosed properties.

The bill, approved 72-13 in a rare weekend session in the Senate, would give the government power to throw a financial lifeline to the ailing mortgage companies Fannie Mae and Freddie Mac. They back or own $5 trillion in mortgages, or nearly half the nation's total. The rescue plan is intended to prevent the two pillars of the home loan market from failing and causing broader market turmoil, while strengthening oversight of their operations.

An estimated 400,000 homeowners would escape foreclosure by getting the chance to refinance into more affordable loans backed by the Federal Housing Administration. There would be higher limits on loans that Fannie Mae and Freddie Mac can buy and the Federal Housing Administration can insure. The loans would be capped at $625,000.

The Senate on Friday removed the last hurdle to passage on a 80-13 test vote that showed broad support for the election-year help. The House passed the bill Wednesday.

Bush initially said the proposal was a burdensome bailout for irresponsible borrowers and lenders. But he dropped a threat to veto it this week after Treasury Secretary Henry M. Paulson argued that the support for Fannie Mae and Freddie Mac was vital to calming markets in the U.S. and abroad.

The administration also opposed the aid for neighborhoods, arguing that approach would hurt homeowners by giving lenders an incentive to foreclose rather than help people stay in their homes.

Supporters said the bill was a long-overdue response to the mortgage meltdown and would help boost the sagging economy. Democrats bashed Republicans for delaying the measure and forcing the Saturday session.

Housing "is a matter of grave concern to many of us who see across America foreclosures that are taking away the homes of many American families and affecting the value of millions of other homes. But this could have been done yesterday," said Sen. Richard Durbin, D-Ill.

Paulson's request for the emergency power to rescue Fannie Mae and Freddie Mac led to a bipartisan deal on the bill, which also creates a regulator with tighter controls on the government-sponsored mortgage companies, as Republicans long sought.

Democrats won concessions as part of the compromise, including a permanent affordable housing program to be financed by the two companies' profits and the $3.9 billion in grants.

"It's been nearly six years since we called for a strong, independent regulator for Fannie Mae and Freddie Mac and nearly a year since the president called on Congress to quickly pass legislation to modernize the Federal Housing Administration to keep more deserving Americans in their homes, especially low-income Americans," White House deputy press secretary Tony Fratto said. "So it's good that the Democratic Congress has finally acted."

He added, "Because of the Democratic Congress' delays and the need for action now, President Bush will sign this bill when he receives it, despite our concerns with some provisions, including nearly $4 billion to help lenders, not the homeowners this legislation is intended to serve."

Many conservative Republicans are opposed to the foreclosure rescue, which they call a bailout of reckless homeowners and unscrupulous lenders. They are equally furious about the help for Fannie Mae and Freddie Mac, companies they say enjoy lavish profits in good times and wield their outsized political clout to resist regulation while depending on the government to bail them out should they falter.

Sen. Jim DeMint, R-S.C., slowed the measure's final passage because Democrats refused to allow a vote on his proposal barring the two mortgage companies from lobbying and making political contributions. He said the legislation was a mammoth bill stuffed with extraneous items, powered by the desire of lawmakers in both parties to act on a pressing issue.

"No matter what's wrong with it, most of the members of this Senate are going to come in and vote for it, and check the box and go home and say they did something about housing," DeMint said.