As lawmakers return from their spring recess, they set their sights on the crux of an economy’s descent. Pressured by recent speeches on the campaign trail, reports of neighborhoods decimated by foreclosure, and the recent resignation of former Housing and Urban Development Secretary Alphonso Jackson, politicians target the current housing crisis as a bipartisan legislative priority.
On Tuesday, Senate Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY) announced a compromise to allow the Senate to move forward on a stimulus package intended to provide much needed relief to the decaying housing sector. The Foreclosure Prevention Act of 2008 put forth by Reid would provide $4 billion worth of grants to cities to purchase and reconstruct abandoned property and $200 million in funding for housing counselors to reach families in danger of losing their homes.
Reid had originally planned to advocate for the redrafting of language that would allow bankruptcy judges to restructure the mortgages of at risk property. This language would have allowed judges to curb the difference of an individual’s debt and the current value of their house, labeling it as “secured debt” that the lender could not obtain. The banking lobby, which Majority Whip Richard Durbin (D-IL) has blamed for the stalling of this overdue stimulus package, had fervently opposed this effort contending if the conditions of a loan could be altered, an uncertainty of profit would exist causing a precautionary raise in mortgage costs.
The deal reached by negotiations between Reid and McConnell asks Senate Banking Committee Chairmen Chris Dodd (D-CT) and ranking Republican Richard Shelby (R-AL) to construct a plan by noon Wednesday. To reach this point, Democratic leadership had to forfeit their critical initiative to rework language on bankruptcy.
Originally, the GOP counterproposal submitted by Senators John Isakson (R-GA), Kit Bond (R-MO), and Lamar Alexander (R-TN), among other things, would have given new homebuyers a $15,000 tax credit in an effort to entice buyers to put faith in a trembling economy. This amendment, which drew criticism from the rental housing industry, was planned to fill abandoned and foreclosed homes that drive down the value of surrounding properties.
Conservatives criticized the GOP’s alternative plan saying it would reward homeowners that have “acted irresponsibly,” rhetoric which was lent to Senator John McCain (R-AZ) in a March 25 campaign stop in California. Architects of this amendment defend it by arguing the tax incentive would not bail out irresponsible borrowers, but rather encourage homebuyers to buy a home that would otherwise remain empty.
Given pressure from constituents that have seen the highest foreclosure rates in decades, Republican lawmakers are keen to work with their Democratic counterparts on this issue. It will be a waiting game to see what exactly the dialogue between congressional leaders produce, however it is speculated that it will include elements of both Republican and Democratic plans as the bipartisan brokering continues.
The New Argument