House Democrats vow new push on economy
Bill that could be introduced next week would aim to prevent foreclosures and spur the mortgage market.
NEW YORK (CNNMoney.com) -- This year's special rebate checks haven't been mailed out yet, but Congress is working on a foreclosure-prevention bill in conjunction with more proposals aimed at stimulating the economy.
Legislation could be introduced as soon as next week, said Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee. Frank's comments came Wednesday following a closed-door economic forum convened by Frank and House Speaker Nancy Pelosi, D-Calif.
A key feature of the foreclosure-prevention bill is likely to be a government-backed fund that would purchase pools of subprime mortgages that lenders had reduced to affordable amounts for borrowers, then refinance them into loans insured by the Federal Housing Administration.
"We should be moving to get these mortgages written down and refinanced," Frank said.
On the Senate side, Banking Committee Chairman Christopher Dodd, D-Conn., has also been working on ideas for a government-backed mortgage rescue fund.
The House Democrats' economic forum came a day after Federal Reserve Chairman Ben Bernanke called on lenders to do more to prevent foreclosures, including reducing the principal that troubled borrowers owe on the loans, rather than simply freezing or reducing interest rates.
The House bill is also likely to include measures that would provide aid to state and local governments to buy, rehabilitate and resell foreclosed properties.
In addition, there may be a provision that offers loan servicers protection from liability if they modify a borrower's mortgage. Servicers, who represent the interest of loan investors, have said they've been concerned about being sued if they change the terms of a mortgage contract.
Nevertheless, servicers have been modifying loans on a voluntary basis through Bush administration-led industry efforts such as HopeNow and Project Lifeline.
"There is a shared sense [among us] that we need to move beyond a case-by-case voluntary approach," said former Treasury Secretary Larry Summers, who attended Wednesday's economic forum.
He and economist Mark Zandi, another forum participant, noted that the economic outlook had worsened since the group last convened in December and that more fiscal stimulus measures may be needed beyond those included in a bipartisan package signed into law by President Bush last month.
Zandi noted, in particular, the possibility of a provisional measure that would allow for an extension of unemployment benefits if economic conditions worsen. Others from the forum, as well as Frank, also discussed the possibility of measures that would boost infrastructure spending, which could create jobs.
Economic numbers haven't been encouraging. Activity in the service sector, for instance, declined in January for the first time in nearly five years and service employers have been cutting staff. That was a sign to some economists that problems are no longer restricted to just housing and manufacturing.
Frank's foreclosure-prevention bill would come on the heels of a foreclosure-prevention bill introduced by Senate Democrats a few weeks ago. That bill was blocked by Senate Republicans last week over a controversial provision that would allow bankruptcy judges to reduce the principal on residential mortgages for bankruptcy filers, a provision lenders have adamantly opposed.