Under the program, lenders will get an FHA guarantee on the loan if they write down the principal amount by 15 percent from the home’s current appraised value. The bill excludes investors and those who lied about their income on a loan application.
A companion measure would give first-time home buyers a $7,500 tax credit and provide $15 billion to allow communities to buy and fix abandoned homes. The vote on the FHA plan was 266 to 155, drawing support from 39 Republicans. The home-buyer tax credit was approved by a margin of 322 to 94.
The bill now goes to the Senate, which must debate and vote on it. President Bush has said he would veto the measure if it passes.
[Photo Courtesy of drinde5 | flickr]
I'm hardly surprised that Dubya and his Administration would do such a thing, especially considering this infusion would come at the expense of taxpayers -- to the tune of $2.7 billion!
"The FHA should be self-financing and not provide a subsidy from taxpayers. Taxpayers shouldn't be taking on the risk of foreclosure, and that means that underwriting standards should be sound," said White House spokesman Tony Fratto.
The Bush administration favors two parts of the House plan, he said: overhauling regulation of housing finance giants Fannie Mae and Freddie Mac, and raising the limit on the size of mortgages that the FHA can insure.
"Those are our priorities," Fratto said. "If there's additional housing legislation, it should meet the president's principles of not using tax dollars to bail out lenders and speculators."
In a related matter, the FHA said it is expanding its FHA Secure program, an initiative launched last year by the Bush administration to help troubled mortgage borrowers.
Targeting primarily those struggling with high-cost subprime adjustable-rate mortgages, the agency said it will offer FHA-guaranteed refinancing to more borrowers by charging them higher premiums based on their risk profile.
The modified FHA Secure program "will help homeowners who can no longer afford their mortgages and missed up to three monthly mortgage payments over the past 12 months," FHA said.
As an alternative to foreclosure, borrowers can refinance with FHA and lenders can voluntarily write down the outstanding subprime mortgage principal balances, it said.
As I said before, the FHA is the new messiah for subprime borrowers, and lenders know this. They're just waiting for the other shoe to drop -- which just might be this latest bill, if it gets past Dubya's desk.
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