The House Financial Services Committee is expected to approve legislation later today that would provide $15 billion to states and cities to buy and rehabilitate foreclosed homes so they can place families back into them. Some Democrats argued that the measure would provide targeted relief to certain areas, especially in the industrial Midwest and the Sunbelt, that have been hit by a wave of foreclosures. California reported this week that a record number of 47,171 homes were foreclosed last year, four times as many as in 2006. Republicans on the panel protested the bill’s cost and said that it could spur speculators to take their property into foreclosure proceedings to receive a bailout. “I believe that [the bill] is the wrong approach and has the potential to do as much harm as good,” said Financial Services ranking member Spencer Bachus. The White House also opposes the bill. But Financial Services Chairman Barney Frank disagreed, noting that the $15 billion would not be nearly sufficient to buy up all foreclosed properties and that while homes are unoccupied, cities lose property taxes and nearby residences lose value as well. “This will cost the federal government something,” Frank said. “If you look at the country as a whole, it will save money.”
The bill would provide $7.5 billion each for grants and loans based on a state’s percentage of foreclosures over the past year, adjusted to its median home price. The zero-interest loans would be repaid back to federal government from proceeds of a resale or, in the case of a rental, a refinance. The grants could be used to cover property taxes and insurance until the residence becomes occupied again. In contrast, the Senate-passed housing measure would provide $4 billion in Community Development Block Grant funds to cities for similar activities.
The panel adopted by voice vote an amendment by Rep. Steven LaTourette, R-Ohio, that would make minor changes in the formula so states with lower median price homes would be eligible to receive additional funding. LaTourette said Ohio would receive $120 million more under his amendment. The overall bill, sponsored by Housing Subcommittee Chairwoman Maxine Waters, D-Calif., may be part of the House Democratic housing stimulus package that will come to the floor the week of May 5. It also could be tucked into a forthcoming supplemental appropriations bill, according to a House aide, so that it may circumvent pay/go rules, which will be a significant issue facing Democratic leaders when they bring the housing package to the floor. Rep. Tom Price, R-Ga., sponsored an amendment to the Waters bill that would apply pay/go rules, requiring a corresponding tax hike or spending decrease. The Price amendment is expected to be defeated. The panel also approved legislation today that would that would, under certain guidelines, remove legal liability from loan servicers that readjust at-risk mortgages to make the monthly payments affordable for the borrower.
This article appears in the April 26, 2008, edition of National Journal Daily PM Update.