WASHINGTON – The Senate overwhelmingly approved housing legislation Thursday that would provide tax credits of $7,000 to people buying foreclosed homes and additional tax breaks for homebuilders. It would also add $10 billion for revenue bonds to be used to refinance subprime loans.
Sen. Jon Kyl, R-Ariz., was one of 12 senators who voted against the bill; 84 voted for it. Sen. John McCain, R-Ariz., as well as the other two presidential candidates in the Senate – Hillary Rodham Clinton of New York and Barack Obama of Illinois – were absent for the vote.
Proponents say this is only the start of congressional help to address the mortgage crisis and acknowledge it won’t help many people facing imminent foreclosure.
“The package that we agreed to is not perfect,” said Sen. Chris Dodd, D-Conn., the primary sponsor of the bill. “But it is an important step.”
Arizona foreclosure activity was up 6 percent from the previous month and nearly 210 percent from February 2007, making the state’s foreclosure rate the fourth highest in the nation. One in every 264 households received a foreclosure filing during the month, according to RealtyTrac, which tracks foreclosures.
Bush opposes the Senate bill because he thinks it would do little to help homeowners avoid foreclosure or reduce the large number of homes for sale. Instead, the administration announced Wednesday it is expanding a Federal Housing Administration program that will allow more homeowners to refinance high-interest mortgages.
The Senate bill’s $7,000 tax-credit to buy foreclosed homes could provide banks an incentive to take control of homes and sell them rather than working with owners who want to renegotiate loans and keep their houses, said Aviva Aron-Dine, a policy analyst at the Center on Budget and Policy Priorities, a think tank that specializes in issues affecting low-income people.
A provision that allows homebuilders to obtain refunds from previous years’ tax payments rewards those who built too many houses and then promoted subprime loans, which allowed people to borrow more than they could afford, said Sen. Judd Gregg, R-N.H. “This cycle was a creation of their excess,” he said.
House legislation, proposed Tuesday by Rep. Charles Rangel, D-N.Y., chairman of the Ways and Means Committee, would take a more consumer-oriented approach. It would provide the equivalent of interest-free loans so first-time homeowners could make down payments, and provide tax credits for low-income housing.
Contributing: Doug Abrahms, Bill Theobald, GNS
Provisions in the Senate mortgage bill
The Senate bill contains:
- $7,000 tax credits claimed over two years for purchasers of foreclosed homes.
- Authority to issue $10 billion in bonds to refinance subprime loans.
- $4 billion in block grants for communities to buy foreclosed homes.
- $100 million for pre-foreclosure counseling.
- An extension, to nine months, of the time a lender must wait before foreclosing on a soldier returning from duty.
- A provision that allows homebuilders to offset more of their current losses with profits dating back four years to obtain larger tax refunds.
- Tax deductions of up to $1,000 for real estate taxes to couples who own a home but don’t itemize their deductions.