Rhode Island news | projo.com | The Providence Journal

« RIH doctor: Prognosis for Kennedy's type of tumor poor | Today | Update: House approves paying toward health insurance »

May 20, 2008

Reed plays key role in foreclosure relief compromise

U.S. Sen. Jack Reed, D-R.I.

WASHINGTON -- With Rhode Island's Sen. Jack Reed providing a crucial piece of the compromise, a key Senate committee overwhelmingly sealed a deal today that could help hundreds of thousands of homeowners refinance their troubled mortgages. Unlike a House measure passed last week, the Senate plan is said to have the president's blessing.

The Senate Banking Committee cleared the foreclosure prevention package on a vote of 19 to 2, sending the full Senate a loud bipartisan signal that, according to Connecticut Sen. Christopher J. Dodd, the committee's chairman, could spell enactment of broad mortgage relief -- along with a strong dose of banking reform and low-income rental housing aid -- by July 4.

"Now we can respond to three pressing concerns: keeping people in their homes by preventing foreclosure, creating the housing program for the poor, and paying for both with a special new surcharge on Fannie Mae and Freddie Mac," Reed said. Rhode Island's senior senator, a Democrat, is a committee member in the bipartisan talks that forged the compromise.

Dodd, and Alabama Sen. Richard Shelby, the ranking Republican on the panel, credit Reed with a key role in fashioning the so-called "pay-for," a levy on Fannie Mae and Freddie Mac that allays Republican concerns about what some have portrayed as a taxpayer bailout of ill-advised mortgages.

Shelby said President Bush -- who has threatened to veto the mortgage relief package that passed the House last week -- will not veto an anti-foreclosure bill akin to what the Senate panel produced today. Bush said last week that the House bill would help "speculators and lenders," while risking taxpayer money.

The Senate bill would raise an estimated $500 million -- less than one-fifth the projected cost of the House version of the bill -- by collecting just over half a penny on each dollar’s worth of mortgages issued through Freddie Mac and Fannie Mae. The Senate version of the foreclosure remedy would assist an estimated 500,000 families, according to Dodd.

-- John Mulligan of the Journal Washington Bureau

Your turn: Are there foreclosed homes on your street? How are they affecting you?

The Senate bill reduces the cost of the aid package in part by limiting its life to three years.

In the first year of its existence, 65 percent of the new fund would go to finance federally backed mortgage insurance that would rescue homeowners from foreclosure by allowing lenders to reduce the outstanding principal owed on troubled mortgages. The loans could then be rewritten as long-term, fixed-rate mortgages. Much of the foreclosure crisis is attributable to adjustable-rate mortgages that proved too expensive for homeowners when they were adjusted upward.

The remainder of the fund, 35 percent, would be used to help expand the pool of housing that poor people can afford. The Department of Housing and Urban Development would administer the new program through state agencies such as Rhode Island Housing.

In the second and third years of the program, the fraction of the fund devoted to the low-income housing aid would expand, while the fraction devoted to troubled mortgage relief would shrink.

Congressional liberals, including Reed and the House Banking Committee Chairman Barney Frank, D-Mass., have long viewed fees on Fannie Mae and Freddie Mac -- the huge, government-backed companies that largely finance the U.S. mortgage market -- as a potential source of revenue for expanding low-income housing assistance.

Rhode Island’s foreclosure rates on sub-prime mortgages are among the highest in the nation. Foreclosure initiations almost tripled to more than 1,000 during the first quarter of the year, according to calculations by Rhode Island Housing. The state also faces an acute shortage of affordable housing for poor citizens.

Reed, Dodd and Shelby all pointed to their compromise bill as a potential source of stability -- not only for the troubled housing market but for the economy at large. The purpose of the bill, according to Dodd, is to ``put a floor’’ beneath a market that has plummeted in recent months, with serious consequences for the nation’s growth as well as for hundreds of thousands of individual homeowners.

Posted by Mike McKinney at 5:02 PM | Permalink

Comments

If Reed had not received massive campaign donations from the big banks and lenders like Fannie Mae, and then voted for deregulation of these same institutions, we would not even be in this mess in the first place. Reed is a crook, and the Providence Journal is his PR agency.

Mary | May 20, 2008 7:31 PM link

About 3 years ago I got in a bidding war over a house in Richmond. It was nice house and there was a lot of interest. The selling realtor told the prospective buyers to make their highest and final offer. I made an offer based on a 30 year fixed and 20% down and considered my monthly income to make the payments. The guy that won the house bid with a no down payment loan and who knows what kind of teaser rate. He can't make his payments now. So Sen. Reed thinks that it is a good idea for me to pay for my current house and this bum's house as well. This country is doomed. Section 8 housing. Free food to people that won't work. Free drugs for seniors. Citizenship for illegal immigrant babies. In addition to simply not being fair to those of us who work and take care of our own business, there not enough wealth in this nation to pay for all the freeloaders. Its over. The USA is sunk. We have reached the tipping point.

al | May 20, 2008 10:53 PM link

May 20, 2008

Reed plays key role in foreclosure relief compromise

Comments

Post a comment