Declining home values and a paralyzed housing industry will continue to hurt neighborhoods and communities, drain local tax coffers, boost unemployment and depress the overall economy as the effect of the housing downturn spreads, some Republicans argue.
"No one wins when a house in the neighborhood is foreclosed. Absolutely no one, because it brings down the value of those properties," Brown-Waite said.
At the center of the legislation is a measure that would allow the Federal Housing Administration to insure up to $300 billion in refinanced mortgages if lenders agree to write down the loan principal below the home's current appraised value. The plan would help an estimated 500,000 homeowners avoid foreclosure.
The measure would cost about $2.7 billion, according to the Congressional Budget Office.
Another provision, with particular relevance to California and other states with high home costs, would permanently raise to $729,750 the limit for mortgages that government-sponsored holders Fannie Mae and Freddie Mac can buy.
Without congressional action, that limit could revert back to as low as $362,000 by the end of this year.
"One of the biggest challenges facing the housing market in high-cost states like California is that housing programs have not kept pace with the times. Unrealistically low loan limits for Fannie Mae, Freddie Mac and FHA mean that people living in high-cost states have not fully benefited from these programs," said Rep. Jerry McNerney (D-Pleasanton).
Supporters said the bill would also remove a key obstacle that has prevented many homeowners from refinancing -- the fact that they have no equity because their home has lost value and is now worth less than they owe on their mortgage.
Opponents argued that the FHA program would bail out lenders, not homeowners, and reward reckless behavior by both borrowers and lenders.
"More than nine out of 10 mortgage holders make payments on time. They will now be on the hook for bad mortgage debt, as will renters saving for a first-time home, and those who own their homes outright," said Rep. Wally Herger (R-Chico). "This bill sends the signal that there are no real consequences for poor lending or borrowing practices, and encourages more of the same behavior that led us here in the first place."
