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Dodd: Everyone Benefits From Housing Bill

When it comes to the U.S. mortgage mess, was it the lenders or the borrowers that caused the problem?

Ask Sen. Chris Dodd, D-Conn., and he’ll tell you that at this point it doesn’t matter all that much.

There are between 9 million and 12 million homes where the debt exceeds the equity, Dodd told Cramer during an interview Wednesday, and “those numbers are growing.”

A “contagion effect” has taken hold, Dodd said, and now the weakness in residential mortgages is bleeding into other areas of the economy such as commercial mortgages, municipal finance and student loans.

But “the heart of the problem is housing,” Dodd said. And “the heart of the housing problem is the foreclosure issue. Until you address that, all of this is going to continue and get worse.”

The homeowner-rescue bill Dodd helped to push through the Senate banking committee, among other things, will provide cheaper, government-backed loans to Americans in danger of foreclosure. The full Senate still has to pass the bill and then President Bush, who's not necessarily a proponent, has to sign off on it.

Dodd admitted that the White House does at times seem insensitive to the troubles of homeowners.

“There’s this notion somehow of these people got into the mess themselves,” he said, as if “it’s their fault. There is something called ‘mortgage malpractice’ here,” meaning predatory lenders.

Many Americans seem to share the same attitude. Right or wrong, though, Dodd points out, the housing problem needs to be solved. Those who complain about their neighbors being “rescued” should consider this, he said: Foreclosures don’t just hurt the owner – they hurt the whole neighborhood.

There were 8,100 foreclosure filings a day in April, Dodd said. That means over 16,000 next-door neighbors watched their home values decline as a result. In fact, home values drop at least 1% a day as long as that foreclosure sign next door stays up.

“So everybody benefits when we get something like this [bill] moving,” Dodd said.

As for a veto, “I’m more optimistic now than I was a few weeks ago” about the bill being passed, Dodd said. Both Republicans and Democrats have come together on the measure, which includes the foreclosure fix, an affordable housing trust fund, and a new regulatory body to oversee Fannie Mae and Freddie Mac, and a veto would erase all that work.

“I can’t believe they’re going to do that,” Dodd said.

What’s Cramer’s take on Dodd’s legislation?

“This is the beginning of the end of the decline in your house’s value,” he said.

Questions for Cramer? madmoney@cnbc.com

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