Wednesday, April 2, 2008

Senate agrees on compromise to help homeowners

WASHINGTON — Senate leaders on Wednesday night announced a multibillion-dollar bipartisan compromise measure to aid families facing foreclosure amid the sharp housing downturn.
The proposal, which could be debated as early as Thursday, contains funding to provide foreclosure counseling to beleaguered households, help local governments buy and refurbish foreclosed properties and increase the limit on loans backed by the Federal Housing Administration.

But negotiators for both parties could not reach agreement on a provision that would give foreclosed homeowners more lenient treatment in bankruptcy proceedings.

Lawmakers were also forced to shelve a more ambitious FHA mortgage rescue plan but promised to continue working on the issue.

"This is not a complete package. Obviously, there is a lot more work that needs to be done," said Banking Committee Chairman Chris Dodd, D-Conn.

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"This will be the first reaction. It will not be the last," said Alabama Sen. Richard Shelby, the Banking Committee's top-ranking Republican.

The compromise includes:

•Foreclosure aid. A $4 billion package to aid communities hard hit by foreclosures and mortgage delinquencies. Local governments could use the funds to buy and rehabilitate foreclosed homes at a discount.

•Government-backed mortgages. Increased loan limits for FHA-guaranteed mortgages.

•Financial counseling. About $100 million in new funding for housing counseling to help up to 250,000 families.

•Tax credit. A $7,000 tax credit, over two years, for buyers of foreclosed homes or properties on which foreclosure action has been filed.

•Business tax relief. Authority for home builders and other firms that are losing money to reclaim taxes paid up to four years ago vs. two years now.

The package was negotiated against a backdrop of increasingly bleak housing market news.

During February, new foreclosure filings — including default notices, bank repossessions and auction sale notices — were reported on 223,651 properties nationwide, according to RealtyTrac, an online marketplace for foreclosure properties. That's up 60% from a year earlier.

Many business groups applauded the compromise. The Mortgage Bankers Association said the plan would "keep at-risk borrowers in their homes."

But a coalition of consumer, housing and civil rights groups criticized the failure to reach agreement on bankruptcy changes they say would help 600,000 families avoid foreclosure.

The omission represents "a win for the financial services industry that brought us this mess," the coalition said.

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