Home for sale signs line a street of a new subdivision in Cascade Locks, Ore., Wednesday, April 9, 2008. The Bush administration announced new steps Wednesday to help more homeowners head off foreclosure. The Senate, in the meantime, worked to complete a bipartisan housing bill the White House says would worsen the mortgage mess. (AP Photo/Don Ryan)
WASHINGTON (AP) -- Democratic and Republican senators have crafted a package of tax breaks to help businesses and homeowners weather the housing crisis and head off deeper economic distress. Finding support for the proposal beyond the Senate may be a problem.
The Bush administration opposes the plan, saying it would make the mortgage mess worse. In the House, Democratic leaders regard the Senate proposal as skewed toward businesses rather than homeowners.
Key elements of the measure, which the Senate is expected to approve Thursday, are large tax breaks for homebuilders and credits for people who buy foreclosed properties, as well as $4 billion in grants for communities with the highest foreclosure rates to buy and rehabilitate foreclosed properties.
Senators are working to add $6 billion in tax breaks for renewable energy producers, as part of what proponents call an important first step to addressing the nation's economic woes. It also offers $100 million for pre-foreclosure counseling and stronger loan disclosure requirements.
The $25 billion tax break the plan offers to homebuilders and other businesses absorbing heavy losses and the energy tax package were both dropped from an economic rescue plan enacted in February. Critics of those proposals were concerned that they were overly expensive and would not stimulate the economy.
But deepening public worries about the housing crisis appear to have emboldened lawmakers to swell the $9 trillion deficit to pay for the measures.
The bill also has a $7,000 tax credit for the purchase of foreclosed homes, a move the Bush administration argues would unfairly reward purchases that would have happened anyway, and could devalue other homes and encourage foreclosures.
The measure calls for a long-awaited modernization of the Federal Housing Administration that would enable more homeowners to refinance into loans backed by the Depression-era agency.
It includes $10 billion in tax-free mortgage revenue bonds to help homeowners refinance subprime loans, a move endorsed by President Bush.
A House bill takes a far different tack, steering tax breaks toward first-time home-buyers and investors in low-income rental housing. The measure is likely to be paired with a broader housing rescue package being drafted by Rep. Barney Frank, D-Mass., the Financial Services Committee chairman, that would have the FHA step in to back $300 billion in refinanced loans for 1 million or more homeowners who otherwise might face foreclosure.
Under a similar plan by Sen. Chris Dodd, D-Conn., the Banking Committee chairman, the FHA would insure up to $400 billion in loans.
The Bush administration countered those plans Wednesday with its own, far narrower, proposal. It would expand an existing FHA program to allow more homeowners who are facing large rate hikes to refinance into more affordable government-insured loans.
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