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House Set to Pass Housing Rescue Bill

The House is due Wednesday to begin debating a housing rescue package that could see the government buy up $15 billion of abandoned homes and help an estimated half million homeowners facing foreclosure.

AP

The sweeping bill would offer fresh spending, tax credits and a new government guarantee on many risky loans to bolster the national housing market.

Declining home values and rising foreclosures over the past 12 months have darkened the mood of U.S. consumers and pushed the economy toward recession.

Recent reports show consumer confidence hit a five-year low in April, while home prices booked a record drop in February.

The Democratic plan combines a variety of new measures as well as some already-passed legislation in a bulky bill that is expected to garner significant Republican support.

"We will pass a bill," Rep. Barney Frank, chairman of the House Financial Services committee, which approved the bill last week, told reporters Tuesday.

Significantly, nearly a third of Republicans on Frank's committee voted for his portions of the housing bill.

But late Tuesday, the White House threatened to veto the housing plan and took particular aim at a provision that would deliver $15 billion of federal grants to cities and towns so that they could buy foreclosed homes in disrepair.

Such spending would wrongly benefit the mortgage investors who now own those empty homes, the White House said in a statement.

Government Backstop

A key aspect of the legislation would provide a cash infusion and new mandate for the Federal Housing Administration to guarantee up to $300 billion of home loans when the property has sunk in value since the mortgage was written.

Lenders would have to erase a portion of the original loan to secure a government guarantee on future payments.

An independent government study estimates that 500,000 borrowers could be helped under that program.

In a separate statement Tuesday, Washington's leading housing agency faulted the Democrats' plan for putting too much federal money at risk and contended that it could help many homeowners by using administrative tweaks that do not require such legislation.

President Bush would be inclined to veto the bill, the White House said in a statement.

Another element of the plan would give a $7,500 tax credit to new, first-time homebuyers and allow states to issue $10 billion in tax-exempt bonds to refinance shaky loans.

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