WASHINGTON, July 24 (AFP): A wide-ranging housing rescue plan passed by the US House of Representatives yesterday could help ease the downward spiral in the property market that is weighing on the US economy, analysts say.
The plan, which offers aid to homeowners facing foreclosure and seeks to support mortgage finance giants Fannie Mae and Freddie Mac, cleared a major hurdle before the House vote Wednesday when the White House dropped its threat to veto the plan, despite some reservations.
"This is a positive step," said Gary Thayer, senior economist at Wachovia Securities.
"If the housing market continues to decline it will hurt homeowners and lenders. I think it's important to stabilize the situation because the Fed (Federal Reserve) can't do much more in cutting rates."
The legislation, which passed in the House by 272 votes to 152 and will now be submitted to the Senate for approval before going to President George W. Bush for his signature, provides some 3.9 billion dollars to help local governments buy and rehabilitate foreclosed homes.
It also permanently boosts the dollar limit for mortgages that can be repurchased by Fannie and Freddie and expands the federal mortgage insurance program, moves that could add liquidity to the housing market. The bill would allow the Federal Housing Administration to insure an additional 300 billion dollars in loans.
Significantly, the bill reforms Fannie and Freddie's oversight and would provide for new credit and direct federal investment in the government- sponsored enterprises (GSEs), which have a congressional charter but are owned by shareholders.
White House spokeswoman Dana Perino said Bush agreed to the plan to help deal with the crisis, despite a number of objections.
"The president would not have signed this bill if we had a lot of extra time on our hands. We don't," she said.
"Congress is set to go out to recess-on its next recess, and we do not believe that given the essential need to move promptly right now that a prolonged veto fight-even though we think we would win it-that a prolonged veto fight would be good for the housing industry right now."
Perino said the administration was concerned that the aid package "does nothing to help people actually stay in their home, and in fact there are some people who believe it would actually cause more foreclosures."
She said banks now have an incentive to keep homeowners in place but that "if they know they're going to get a bailout from the federal government or from their state government because we're providing them money, they're less likely to try to help people stay in their homes."
