Housing bill heads to Senate; Bush withdraws veto threat

Senate approval could come by the end of the week.

"This is the most important piece of housing legislation in a generation," said Senate Banking Committee Chairman Christopher Dodd (D-Conn.).

The measure seeks to stave off foreclosure for 400,000 or more homeowners in part by allowing them to refinance into lower-cost government-insured mortgages, provided lenders agree to take a loss.

It also includes a plan by Treasury Secretary Henry M. Paulson to bolster confidence in Fannie and Freddie by allowing the government to temporarily increase its lending to the federally chartered companies and to buy their stock, if necessary.

Another provision seeks to stimulate the housing market with about $15 billion in tax breaks, including a tax credit of as much as $7,500 for first-time home-buyers.

Of interest to California and other areas with high housing costs, it would permanently raise the cap on mortgages that Fannie Mae and Freddie Mac can buy or guarantee to $625,500.

"This will begin to lay the groundwork for a turnaround in the housing market and hopefully in the broader economy as well," said House Financial Services Committee Chairman Barney Frank (D-Mass.), a chief architect of the bill.

The 272-152 House vote came a day after a report that a record number of Californians lost their homes in foreclosures in the last three months.

The economy has become a top presidential campaign issue. Democrat Barack Obama and Republican John McCain each expressed support for the housing bill.

Obama said the bill should be followed by approval of a second economic stimulus measure of "at least $50 billion." McCain economic advisor Douglas Holtz-Eakin said the housing bill wasn't ideal, but "the need for timely action is clear."

The vote laid bare divisions among Republicans as members came under pressure from the White House and business groups to support the measure and set aside their concern about its potential cost to taxpayers.

Among House Republicans, 45 voted for the bill and 149 against it. All but three Democrats voted in favor.

"Just because the housing market has tumbled doesn't mean we should capriciously finance a big fat government bailout," said Rep. Sam Johnson (R-Texas).

House Republican leader John Boehner of Ohio expressed disappointment that the president would sign a "multibillion-dollar bailout for scam artists and speculative lenders."

But Rep. Gary Miller (R-Diamond Bar), who supported the bill, said it would counter perceptions that Freddie or Fannie is in trouble.

"We needed to eliminate any perception of risk associated with those entities," he said. "I don't think they're ever going to need the help, but we're there if they do, and if they do, they've got to pay us back."

"The cost of inaction is far too great," said Rep. Mary Bono Mack (R-Palm Springs), who also voted for the measure.

The other California Republicans who voted for the measure are Ken Calvert of Corona, John Campbell of Newport Beach, David Dreier of San Dimas, Elton Gallegly of Simi Valley, Duncan Hunter of Alpine, Jerry Lewis of Redlands, Dan Lungren of Gold River, and Howard P. "Buck" McKeon of Santa Clarita.