U.S. Rep. Barney Frank, D-Mass, managed to get a controversial foreclosure prevention act passed during a House vote on Thursday. The bill, which will supply an additional $300 billion in funding to support more FHA-insured loans for struggling borrowers, has been praised for some if its initiatives and criticized for relying too heavily on taxpayer funds.
President George W. Bush and other politicians took issue with the bill earlier in the week, saying it contains provisions that will help irresponsible lenders and borrowers on the backs of American taxpayers.
U.S. Congressman Spencer Bachus, R-Ala., reiterated these concerns on the House Floor Thursday.
“Before we create a massive new government program and put billions of taxpayer dollars at risk, we need to think long and hard about whether our actions are fair to the many millions of Americans who planned carefully and made sacrifices to meet their financial obligations,” Bachus said. “There are currently 51 million homeowner families and 34 million renter families making their payments on-time every month. There are an additional 25 million families who have paid their mortgages in full, or who never had a mortgage. Asking these 110 million hard working families to pick up the cost of a bailout of the lenders and securitizers who helped create the housing crisis offends many Americans’ sense of fair play, and for good reason.”
The MBA says it supports part of the bill and looks forward to working with the Senate to create a package that is efficient and effective.
“FHA modernization has long been one of MBA’s top legislative priorities and we are extremely pleased to see the legislation included in this bill,” said Kieran Quinn, chairman of the Mortgage Bankers Association (MBA). “Likewise, creating a new regulator for the GSEs is crucial given the current state of the market.”
Quinn added that it’s the MBA’s desire to have safeguards included in the bill to ensure bailouts are offered only to deserving borrowers.
The FHA reform bill is not the only piece of legislation that raised serious questions about how much is too much aid. Despite threats of a presidential veto, the U.S. House of Representatives also passed The Neighborhood Stabilization Act (H.R. 5818) on Thursday. The bill, introduced by U.S. Rep. Maxine Waters (D-CA) aims to clear up urban blight by providing $15 billion in federal grant funding to help local and state governments clean up and restore neighborhoods impacted by foreclosures.
The bill has serious critics. Matt Kibbe, president and chief executive officer of FreedomWorks.org—an association that advocates for a free market fiscal policy—issued a warning about many aspects of the foreclosure prevention legislation that made it through the House Thursday. “The proposed legislation amounts to an enormous regional redistribution of wealth that would expose taxpayers nationwide to new liabilities in order to bailout homeowners and lenders in a handful of states,” Kibbe said. “It also rewards those who made imprudent decisions at the expense of those who have been living within their means, making responsible fiscal choices.”