Obama Housing Plan Receives Mixed Response On Capitol Hill
18 Februar 2009 - 8:01PM
Dow Jones News
The Obama administration's wide-ranging foreclosure prevention
and housing plan received the expected response on Capitol Hill on
Wednesday, with Republicans wary of the scope of the proposal and
Democrats heralding its ambition.
"President Obama's plan is bigger and bolder than most everyone
thought, which is a refreshing change from the failed attempts of
the last administration," said Sen. Charles Schumer, D-N.Y., in a
statement.
The Obama plan, which was unveiled earlier Wednesday, marks the
most expansive effort yet by the government to combat the record
numbers of foreclosures that have weighed on the economy and are at
the root of the credit crisis. The plan would set aside $75 billion
as part of a series of proposals to help refinance some struggling
borrowers, modify the loans of others, and use Fannie Mae (FNM) and
Freddie Mac (FRE) to help the mortgage market.
House Speaker Nancy Pelosi, D-Calif., described the plan as a
"comprehensive strategy to reduce record foreclosures and stop the
nationwide plunge in home values."
"Addressing the foreclosure crisis is essential to get our
economy moving again," Pelosi said in a statement released by her
office.
Their GOP colleagues were less convinced, wary that the plan
would benefit homeowners who made rash decisions or committed fraud
to obtain their mortgage.
"I think that this plan will only delay inevitable future waves
of the foreclosure crisis, rather than stem the tide," said Rep.
Scott Garrett, R-N.J. He criticized the plan for not rewarding
people who are successfully making their payments or chose to
rent.
House Republican Leader John Boehner, R-Ohio, and GOP Whip Eric
Cantor, R-Va., welcomed the plan's announcement by sending
President Barack Obama a series of questions on it. These included
how the administration will prevent homeowners who receive aid from
eventually going back into default, and whether banks would be
compensated for making loans "they should have never made in the
first place."
Obama was quick to address concerns that the plan could be
exploited by homeowners who took risky bets on the housing market.
Obama, in prepared remarks for a speech in Phoenix, said the
proposal is focused on those who "played by the rules." People
whose traditional mortgages are "underwater" will be eligible for
refinanced loans, while people with subprime mortgages will be able
to modify their loans.
"I also want to be very clear about what this plan will not do:
It will not rescue the unscrupulous or irresponsible by throwing
good taxpayer money after bad loans," Obama was to say.
Still, the potential for fraud is a concern for some senators.
Sen. Charles Grassley, R-Iowa, said Wednesday he sent a letter to
Treasury Secretary Timothy Geithner last week raising the issue and
requesting information from Treasury on the foreclosure prevention
plan.
"Providing a benefit such as a federal loan modification program
to those who committed fraud is bad policy and unfair to the honest
borrowers who played by the rules," Grassley wrote in a Feb. 12
letter to Geithner.
Lawmaker opinion will be important as the Obama administration
seeks to implement its housing plan. A number of provisions in the
proposal, including a rewrite of bankruptcy laws to allow judges to
adjust the terms of mortgage loans, will need to be enacted by
Congress to take effect.
-By Michael R. Crittenden, Dow Jones Newswires; 202-862-9273;
michael.crittenden@dowjones.com