US Congress approves housing bill, sends to Bush

WASHINGTON - The U.S. Congress approved a massive housing market rescue bill on Saturday, offering emergency financing to Fannie Mae and Freddie Mac, creating a new regulator for the mortgage titans and setting up a $300-billion fund to help troubled homeowners.

The bill was approved by the Senate in a 72-13 vote. It was passed by the House of Representatives on Wednesday. President George W. Bush was expected to sign it promptly.

With foreclosures rising, home sales sluggish and property values down, America is in its deepest housing slump since the Great Depression. The crisis will be eased, but not ended by this election-year bill, said housing activists and scholars.

'We have a housing market going into cardiac arrest. This bill is like CPR to stabilize the situation,' said David Abromowitz, a senior fellow at the Center for American Progress, a think tank in Washington.

The National Community Reinvestment Coalition, an alliance of 600 community investment and development groups, estimated 2.5 million U.S. households will face foreclosure this year.

While Congress' legislation is welcome, the coalition said, it 'will likely have little effect on the foreclosure crisis gripping the financial markets and economy.'

The 694-page bill would establish the $300-billion fund under the Federal Housing Administration to help distressed homeowners get more affordable, government-backed mortgages and get out from under exotic mortgages they cannot afford.

The success of the temporary fund will depend on lenders' willingness to accept losses on original loans to shift overstretched borrowers into new loans. An estimated 400,000 families could be helped by the program, effective Oct. 1.

The measure also offers temporary, contingency financing for Fannie Mae and Freddie Mac. The two government-sponsored enterprises, or GSEs, own or guarantee almost half the country's $12 trillion in outstanding home mortgage debt.

The stock market has whipsawed their stock prices lately on uncertainty about the companies' ability to weather the slump.

If they run into trouble, the GSEs could draw on a temporary line of U.S. Treasury credit or the government could buy shares in them, under a provision inserted in the bill late in its development at the urging of the Bush administration.

Texas Republican Sen. Kay Bailey Hutchison said the housing bill had positive aspects. But she added, 'I am troubled by the inclusion of an unlimited U.S. Treasury credit line to Fannie Mae and Freddie Mac' and possible government stock purchases.

The bill would also create a new regulator for the GSEs with sharper teeth than the existing one, including authority over how much money the companies pay their top executives.

It would send about $4 billion in grants to communities to help them buy and repair foreclosed homes. The White House had vowed to veto the bill over the grants, but dropped its threat on Wednesday. Hours later, the House approved the bill.

The legislation also offers tax breaks to spur home-buying; sets up the first national licensing system for mortgage brokers and loan officers and raises the limit on the size of mortgages that can be guaranteed by federal agencies.

Key provisions of U.S. housing rescue bill

With White House encouragement, the U.S. Congress on Saturday gave final approval to a housing rescue bill that will backstop Fannie Mae and Freddie Mac, create tougher oversight of the mortgage finance giants and spend billions to prevent home foreclosures.

The sweeping legislation, approved by the House of Representatives on Wednesday and the Senate on Saturday, has moved with uncommon speed and could be in place by next week. President George W. Bush and key lawmakers have said they hope the legislation will help restore confidence in a U.S. housing finance system battered by a wave of failing loans.

Following are some key provisions of the legislation:

· Fannie Mae and Freddie Mac, which each have a $2.25 billion line of credit with the Treasury, would see their current government loan limit raised until January 2009.

· If the companies' financial condition were to reach a crisis, Treasury could take an equity stake in either company. That power, too, would expire in January 2009.

· There is a better-than-even chance that the emergency measures will not be needed, meaning there will be no cost to taxpayers. If the lifeline is required, the Congressional Budget Office said, there is a 5 percent chance that the companies may need $100 billion but more likely would need $25 billion.

· A new regulator would be created with broad powers to set capital levels for Fannie Mae and Freddie Mac, with the Fed's consultation.

· The Federal Housing Administration would be authorized to refinance up to $300 billion in failing mortgages with Fannie Mae and Freddie Mac covering billions in expected losses.

· Fannie Mae, Freddie Mac and FHA would be be permitted to purchase loans as large as $625,500 in high-cost areas -- a big increase from the $417,000 cap typically in place.

· Local communities that are burdened with maintenance of abandoned properties would have access to nearly $4 billion in federal grants to buy and repair those homes.

· Many first-time home buyers would be eligible for a tax break worth up to $7,500, and $200 million would be offered to foreclosure-prevention programs

· Local governments would have authority to issue an additional $11 billion of tax-exempt bonds to refinance shaky loans.

· The bill would increase the federal debt limit by $800 billion to $10.6 trillion.