MercoPress. South Atlantic News Agency

Housing rescue bill moves swiftly in US Congress

Rescue plan could cost U$S 100 billion

United States House of Representatives passed on Thursday a massive housing rescue bill that could help struggling homeowners get cheaper loans. The vote came after the White House announced that President George Bush had dropped his threat to veto it.

The bill will now be passed to the Senate for approval before being signed into law.

More than a million Americans have lost their homes in the worst housing crisis since the Great Depression. President Bush's change of heart came despite his objection to a provision for 3.9 billion US dollars in community grants to buy up and repair repossessed homes. Under the rescue plan, hundreds of thousands of homeowners trapped in mortgages they cannot afford on homes that have fallen in value would be able to refinance their mortgages with more affordable, fixed-rate loans backed by the Federal Housing Administration. The bill would set up the first national licensing system for mortgage brokers and other loan officers. It also includes a tax break of as much as 7,500 US dollars for first time home buyers, as well as help for troubled mortgage finance providers Fannie Mae and Freddie Mac. BBC's Michelle Fleury in New York says the need for a rescue plan for Fannie Mae and Freddie Mac gave the housing bill a new sense of urgency. Keeping the two firms open is seen as crucial to the functioning of the housing market, since between them they own or guarantee half the entire mortgage debt in the US. But correspondents say a government rescue could land US taxpayers with a big bill. Earlier this week, the Congressional Budget Office said the rescue plan could cost as much as 100 billion US dollars, although they said the most likely outcome was that it would cost 25 billion. Many congressional Republicans are angry about the legislation, which they say bails out irresponsible homeowners and unscrupulous lenders. Nonetheless, with the White House is now in favour of the plan, it is expected to be approved by the Senate, possibly on Friday or Saturday. "The positive aspects of the bill are needed now to increase confidence and stability in the housing and financial markets," White House spokeswoman Dana Perino said. The bill passed in the House by a vote of 272 to 152. The US Treasury Secretary Henry M Paulson and both Democratic and Republican lawmakers negotiated the final deal. The bill hands the Treasury Department the power to extend Fannie Mae and Freddie Mac an unlimited line of credit and to buy an unspecified amount of their stock if necessary. Mr Paulson called the legislation "a strong message that we are sending to investors" that would play a crucial role in "helping turn the corner" on the housing crisis. The rescue bill approval by the Lower House coincided with even bleaker news: the number of homes sold in the US fell 15.5% in June compared with the same month last year, according to the latest figures from the National Association of Realtors (NAR). The NAR said forced sales such as foreclosures made up a third of sales. The data raised fears about the health of the US economy and sent US shares sharply lower. On Wall Street, the blue-chip Dow Jones industrial average slid 2.43% to end at 11,349 points. NAR said that a key reason for the decline in sales was a lack of first-time buyers. The figures also showed regional variations with existing homes sales falling in the South, the Mid-west and North-east, but still rising in the West, where the population is growing the fastest. Sales were down 2.6% on a month-to-month comparison. The figures also showed that the median price of existing homes was 215,000 US dollars in June, down 6.1% from June 2007. Other house price indexes have suggested that falls in major metropolitan areas may be closer to 15%. Paul Ashworth, senior US economist at Capital Economics said that even when sales begin to recover, the excess supply of unsold homes sitting on the market will continue to put downward pressure on house prices for some time "Most worryingly, the anecdotal evidence suggests that the only reason sales aren't falling at a faster pace is down to the unprecedented surge in sales of foreclosed homes," he said.