GOP Housing Plan Would See Fannie, Freddie Buying Cheap Loans
February 03 2009 - 1:29PM
Dow Jones News
A key Senate Republican proposal aimed at the ailing U.S.
housing market would direct Fannie Mae (FNM) and Freddie Mac (FRE)
to buy up new discounted loans offered by mortgage lenders in a bid
to stimulate demand to clear the backlog of properties and assist
owners struggling to keep up with payments, aides said.
The plan would create a temporary window during which a
federally subsidized rate of between 4% and 4.5% would be available
to all qualifying borrowers, and homeowners looking to
refinance.
Senate Republicans plan to introduce the idea as an amendment to
the economic stimulus plan, which they say does little to tackle
the root cause of the troubled U.S. economy - the housing
market.
It would save the average prospective buyer and homeowner around
$400 a month, Republican aides said, and would be capped at a cost
to the Treasury of $300 billion.
The discounted loan would be for a 30-year term and available
through 2010. It wouldn't be available on loans higher than
$625,500.
Any creditworthy homeowner, or prospective buyer, regardless of
how much they earn, could qualify for the lower loan rate.
Given that Fannie and Freddie are effectively owned by the
taxpayer, the proposal would see the taxpayer subsidize the cost of
the lower mortgages.
The housing proposal will form one of the main thrusts of the
Republicans' attempts to modify the Democratic stimulus
legislation. They argue that the nearly $890 billion package is
bloated and doesn't do enough to immediately stimulate the
economy.
Another Republican proposal would cut the two lowest federal
income tax bands to 5% from 10% and to 10% from 15%. An aide to
Minority Leader Mitch McConnell, R-Ky., said this credit would cost
around $130 billion.
In order to pay for the proposed changes, Republicans plan to
attempt to strip out many of the spending elements in the stimulus
plan they argue will do little to stimulate the economy.
One of the measures in their sights is a tax credit aimed at
Hollywood movie studios, which would allow them to write down 50%
of their 2009 production equipment costs. Republicans say the
credit would cost $246 million.
GOP lawmakers intend to offer several amendments throughout the
week that will attempt to remove aspects of the bill they feel will
be difficult for Democratic lawmakers to defend.
-By Corey Boles, Dow Jones Newswires; 202-862-6601;
corey.boles@dowjones.com
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