WASHINGTON - The House on Tuesday approved a plan to expand federal backing of mortgages in hopes of helping struggling homeowners avoid foreclosure.
The bill passed the House 348-72. It would allow the Federal Housing Administration, which insures mortgages for low- and middle-income borrowers, to back refinanced loans for tens of thousands of borrowers who are delinquent on payments because their mortgages are resetting to sharply higher rates from low initial 'teaser' levels.
Brian Montgomery, the Housing and Urban Development assistant secretary who heads the FHA, said the legislation could enable more than 200,000 homeowners whose loans are excluded from federal backing to come under the agency's umbrella.
'This is a historic day for FHA,' Montgomery told reporters after the vote. He said the administration remains concerned about specific provisions - notably much higher limits in the bill for mortgages that could be insured by the agency, as much as $729,750 in high-cost areas compared with the current $362,000. However, Montgomery added, 'I feel optimistic we'll work out these differences' as the legislation moves through Congress.
In the Senate, the Banking Committee is expected to vote today on a version of the legislation proposed by panel chairman Sen. Christopher Dodd, D-Conn., and its senior Republican, Sen. Richard Shelby of Alabama.
The House measure is Congress' first stand-alone bill passed in response to the mortgage-market tumult of the summer, which came amid a rising tide of defaults and foreclosures. The Senate last week approved spending legislation that includes $200 million in aid to nonprofits and other groups that offer counseling and information to help homeowners avoid foreclosure.
'The American dream is in peril for many families in this country as foreclosures rise and dreams shatter,' Rep. Betty Sutton, a Democrat from Ohio, a state particularly hard-hit by the default wave, declared in House debate before the vote.