U.S. nears passing housing support bill

The U.S. House of Representatives is close to approving a bill that would help homeowners struggling to avoid foreclosure and allow two giant mortgage companies to get government money.

Until Wednesday, U.S. President George W. Bush had been threatening to block the bill because of a provision that would give $3.9 billion US to areas hard hit by the housing crisis.

White House press secretary Dana Perino told reporters Wednesday that Bush now agreed with the bill. "We believe this is not the time for a prolonged veto fight," she said.

The bill:

Gives the Treasury Department the power to lend unlimited amounts to extend Fannie Mae and Freddie Mac, two stressed mortgage companies which back or own $5 trillion in U.S. mortgages, nearly half the country's total.Enables the government to help hundreds of thousands of struggling homeowners get cheaper, fixed-rate loans backed by the U.S. Federal Housing Administration (FHA).Provides $3.9 billion for neighbourhoods suffering from the housing crisis.Provides $15 billion in housing tax breaks, including a credit for people who bought or will buy their first home between April 9, 2008, and July 1, 2009.

Bush backed the bill to support Fannie and Freddie, which are vital players in the U.S. market, but he opposed the $3.9-billion provision because he said it would help lenders, not homeowners.

A price reduced sign on a home in Anitoch, Calif. Dataquick Information Systems reported that lenders in California sent homeowners 113,676 default notices in the first quarter, up 143.1 per cent from the first quarter of 2007.(Paul Sakuma/Associated Press)

"The positive aspects of the bill are needed now to increase confidence and stability in the housing and financial markets," Perino said. "While we have concerns with other aspects of the bill, it is important that the new authorities are put in place promptly," before politicians take their summer break.

The bill would let some homeowners avoid foreclosure by getting FHA-backed loans, but lenders would take losses on the same loans. However, that means they would get something, and would avoid the messy foreclosure process.

Moreover, avoiding foreclosures means the properties will not be forced onto the market, driving down prices and leading to even more foreclosures.

The loans to Fannie Mae and Freddie Mac could cost $25 billion — if needed — but analysts have said that may not happen. The companies and government officials have said they are well capitalized, but investors have bid their shares down to a fraction of their peak prices.

The plan tightens lending controls on the two companies, which were created by the U.S. government to make home ownership easier but are owned by investors.

Concern about their mortgage dealings became a focus for the government because of the lack of investor confidence.

With files from the Associated Press

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