Dems fend off mortgage bill challenges
House committee passes bill that would authorize FHA to guarantee $300 billion in relief to troubled homeowners.
NEW YORK (CNN) -- A bill meant to help homeowners caught up in the spreading mortgage crisis received committee approval Thursday after Democrats fended off numerous Republican challenges to the bill.
The bill would authorize the Federal Housing Administration to guarantee up to $300 billion in new mortgages offered by government-approved private lenders.
The House Financial Services Committee passed the bill on a vote of 42 to 21. The full House is expected to take up the measure next week, committee aides said.
The committee estimates the program could help 1.5 million homeowners who are having difficulty paying their mortgages.
Committee chairman Rep. Barney Frank, the main author of the bill, says the millions of individuals who might face foreclosure because of the expanding credit crisis deserve help, even if they made a mistake by borrowing beyond their means.
"There are people who made loans that should not have been made; there are some people that were wrong to take the loans out, some wrong to make the loans. If nothing happens and all those loans go under foreclosure, the economy suffers," he said.
Republican amendments defeated. On Wednesday, the Democratic members of the House Financial Services Committee defeated several GOP amendments to the proposal, which would have excluded people with bad credit, limited the program to low- and middle-income borrowers and eliminated a requirement that lenders accept losses. They were all defeated on mostly party-line votes.
The Bush administration also "strongly opposes" the legislation, calling the bill a "bailout." The administration expressed its objections in a letter send last week to Franks.
The bill would not authorize the government to loan money directly to homeowners, but would guarantee new mortgages offered by government-approved private lenders. The new mortgages could at most equal 90% of a home's current value.
Only homeowners who have a mortgage-debt-to-income ratio of 35% or higher and who entered into a mortgage before January would qualify for the program.
For a homeowner to get a new FHA-backed loan, the holder of the current mortgage would have to accept a loss and take a payment totaling no more than 85% of the home's value.
The government would also get a share of profits if the homeowner sold the house in the future and would have to pay the lenders only if homeowners defaulted on FHA-backed mortgages. The Financial Services committee estimates that 1 to 2% of the new loans would default, costing the government $3 billion to $6 billion.
The administration touted existing FHA programs, including the FHASecure plan the president announced in August, calling them "simpler and more targeted" ways to help homeowners who are behind on their mortgage payments.
The administration says the FHASecure program will help half a million homeowners by the end of the year.
By Scott J. Anderson and Lesa Jansen 
