News
Legislative efforts to address the housing crisis were overshadowed this week but not stymied by the Bush administration's promotion of an interest-rate freeze for some borrowers.
Analysts say the Bush plan, described by consumer groups and industry experts as limited in scope, will spur the Democratic-led Congress to more aggressively push proposals that have thus far stalled, including bills that would tighten lending standards and help bankrupt Americans keep their homes.
Sen. Christopher Dodd, D-Conn., is expected next week to introduce a long-awaited bill aimed at cracking down on lending abuses.
The Bush administration may have inadvertently re-energized Congress on the housing crisis by overselling the plan, said Bert Ely, a banking consultant based in Alexandria, Va., who is leery of government intervention.
"It's highly likely that we're going to hear a chorus of disappointment next spring," Ely said of the Bush plan. He worries that more far-reaching action such as a mandatory, rather than voluntary, freeze on interest rates could cut investment in the U.S. mortgage market, causing a flare-up of the credit crunch that hurt investors around the world this summer and fall.
When Congress returns from its break in January, "they're going to face a gravely deteriorating housing market" and the potentially severe economic fallout, which will provide more impetus for action, said Howard Glaser, a former housing official in the Clinton administration.
Plus, with an election coming next fall, both Democrats and Republicans will feel additional pressure to act, analysts said.
Dodd, a presidential candidate, on Friday sent a letter, signed by 16 other Senate Democrats, to Federal Reserve Chairman Ben Bernanke urging the central bank to use its own power to establish tighter lending standards. The Fed, which has been working on new rules for several months, plans to release them before year-end.
Democrats are also moving ahead with legislation that would allow bankruptcy judges to modify home loans and adjust interest rates, a power advocates say could help up to 600,000 homeowners avoid foreclosure. The mortgage lending industry is dead-set against the idea, arguing that it will drive up mortgage rates because lenders will be uncertain about how much money they can recoup through a foreclosure sale.
"It's the exact wrong thing to do at this time," Kurt Pfotenhauer, senior vice president for government affairs at the Mortgage Bankers Association said in an interview earlier this week. "It will exacerbate the problem."
All year, lawmakers and Bush administration officials have been struggling to figure out what to do without much success so far about a surge in mortgage defaults that started among subprime borrowers with poor credit records and has since spread to other loans.
Of the nearly 3 million subprime adjustable-rate loans surveyed by the Mortgage Bankers Association in the third quarter, a record 23.5 percent were either 30 or more days past due or entered the foreclosure process.
In addition, among adjustable-rate loans made to borrowers with strong credit, 6.2 percent were either 30 or more days past due or entered the foreclosure process in the same quarter nearly double the rate of a year earlier.
The Bush administration, along with some House Democrats, has been frustrated by what many see as a lack of progress in the Senate on mortgage legislation.
For example, a bill to expand authority for the Federal Housing Administration, a Depression-era agency that insures loans made to low-income borrowers passed the House in September with broad bipartisan support. President Bush called on Thursday for its passage.
Sen. Tom Coburn, R-Okla. has twice blocked an effort to pass this bill on a voice vote, arguing that it would put too much financial risk on the back of the government.
In response, Sen. Charles Schumer, D-N.Y. quipped Thursday that while Bush supports the bill, "someone in the White House forgot to send the memo over to the Senate Republicans."
Analysts say the Bush plan, described by consumer groups and industry experts as limited in scope, will spur the Democratic-led Congress to more aggressively push proposals that have thus far stalled, including bills that would tighten lending standards and help bankrupt Americans keep their homes.
Sen. Christopher Dodd, D-Conn., is expected next week to introduce a long-awaited bill aimed at cracking down on lending abuses.
The Bush administration may have inadvertently re-energized Congress on the housing crisis by overselling the plan, said Bert Ely, a banking consultant based in Alexandria, Va., who is leery of government intervention.
"It's highly likely that we're going to hear a chorus of disappointment next spring," Ely said of the Bush plan. He worries that more far-reaching action such as a mandatory, rather than voluntary, freeze on interest rates could cut investment in the U.S. mortgage market, causing a flare-up of the credit crunch that hurt investors around the world this summer and fall.
When Congress returns from its break in January, "they're going to face a gravely deteriorating housing market" and the potentially severe economic fallout, which will provide more impetus for action, said Howard Glaser, a former housing official in the Clinton administration.
Plus, with an election coming next fall, both Democrats and Republicans will feel additional pressure to act, analysts said.
Dodd, a presidential candidate, on Friday sent a letter, signed by 16 other Senate Democrats, to Federal Reserve Chairman Ben Bernanke urging the central bank to use its own power to establish tighter lending standards. The Fed, which has been working on new rules for several months, plans to release them before year-end.
Democrats are also moving ahead with legislation that would allow bankruptcy judges to modify home loans and adjust interest rates, a power advocates say could help up to 600,000 homeowners avoid foreclosure. The mortgage lending industry is dead-set against the idea, arguing that it will drive up mortgage rates because lenders will be uncertain about how much money they can recoup through a foreclosure sale.
"It's the exact wrong thing to do at this time," Kurt Pfotenhauer, senior vice president for government affairs at the Mortgage Bankers Association said in an interview earlier this week. "It will exacerbate the problem."
All year, lawmakers and Bush administration officials have been struggling to figure out what to do without much success so far about a surge in mortgage defaults that started among subprime borrowers with poor credit records and has since spread to other loans.
Of the nearly 3 million subprime adjustable-rate loans surveyed by the Mortgage Bankers Association in the third quarter, a record 23.5 percent were either 30 or more days past due or entered the foreclosure process.
In addition, among adjustable-rate loans made to borrowers with strong credit, 6.2 percent were either 30 or more days past due or entered the foreclosure process in the same quarter nearly double the rate of a year earlier.
The Bush administration, along with some House Democrats, has been frustrated by what many see as a lack of progress in the Senate on mortgage legislation.
For example, a bill to expand authority for the Federal Housing Administration, a Depression-era agency that insures loans made to low-income borrowers passed the House in September with broad bipartisan support. President Bush called on Thursday for its passage.
Sen. Tom Coburn, R-Okla. has twice blocked an effort to pass this bill on a voice vote, arguing that it would put too much financial risk on the back of the government.
In response, Sen. Charles Schumer, D-N.Y. quipped Thursday that while Bush supports the bill, "someone in the White House forgot to send the memo over to the Senate Republicans."
