UPDATE: Obama Housing Plan Receives Mixed Response On Hill
18 Februar 2009 - 10:46PM
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.
Her 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 that "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.
In a speech in the Phoenix area, Obama 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.
"But I 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 said.
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, though few legislative
measures will have to be enacted to put the proposal in place.
House Financial Services Chairman Barney Frank, D-Mass., said the
administration already has the ability to implement many of the
provisions through the Wall Street rescue legislation passed in
October. "This is precisely the decisive action we need, and the
President is using the exact same authority Congress gave the Bush
administration in the [rescue] legislation and the housing bill
passed last summer to deal with the foreclosure crisis," Frank said
in a statement.
The only major component of the Obama proposal that will require
legislative action is banking-industry opposed changes to
bankruptcy law, which would allow judges to rework the terms of
mortgage loans on a primary residence. Democrats over the last year
have repeatedly tried to enact such changes, only to be opposed by
Republicans and aggressive lobbying by financial services
firms.
Sen. Christopher Dodd, D-Conn., the chairman of the Senate
Banking Committee, described the bankruptcy law reforms as an
"important stick" to make sure lenders make a good-faith effort to
work with borrowers. Boehner, however, questioned the need to allow
judges to "cram down" mortgage loans.
"Should a responsible plan include a cramdown provision that
could increase the monthly mortgage payments for responsible
borrowers?" Boehner asked in a statement released by his
office.
Pelosi said that lawmakers "stand ready" to act quickly on the
bankruptcy law changes, as well as to make improvements to existing
government housing programs to complement Obama's proposal.
In addition to the bankruptcy changes, it will take
congressional action to make additional reforms to the Federal
Housing Administration, according to a Treasury spokesman.
-By Michael R. Crittenden, Dow Jones Newswires; 202-862-9273;
michael.crittenden@dowjones.com