U.S. Senate Passes Version Of Home Loan Aid Bill

By October, people struggling with potential foreclosures on their homes may have a new opportunity to refinance their mortgages. The U.S. Senate passed its version of a housing-crisis rescue on Friday, and after some potential tweaks in the House, the bill soon could head to the president's desk.

The part of the bill that most directly affects individuals, the foreclosure aid, was largely authored by Sen. Christopher Dodd, D-Conn., who made it his focus since returning from the presidential campaign trail six months ago. After the bill passed, 63-5, a relieved Dodd said, "I think everyone felt this was a time we really have to come together."

Here are the basics of the foreclosure help:

It's a voluntary program that requires agreement between a troubled borrower and a lender. The lender has to agree to refinance with a 30-year, fixed-rate loan at less than the current market value of the home. The borrower has to agree to give up part of the profit if he or she sells the home for a gain in the coming years.
Until the president signs the bill into law, the final elements of the Federal Housing Administration-run program — set in the Senate bill to start in October — won't be settled. When it does become active, estimates indicate that the program could help as many as 500,000 homeowners.

The housing market has been the victim of a decline in home values while adjustable-rate loans spike to levels unaffordable for many borrowers. Nationwide, more than 8,000 properties enter foreclosure each day, as Dodd has repeated daily on the Senate floor.

The bill is considerably more complex than its temporary foreclosure provisions, which run only through 2012. It also establishes a new government regulator of mortgage giants Fannie Mae and Freddie Mac. It modernizes the Federal Housing Administration, and it provides money for local governments to buy foreclosed property in especially troubled areas, among many other provisions.

Dodd had to answer questions Friday about the funding sources for the foreclosure prevention plan — Fannie Mae and Freddie Mac — because their stock prices have fallen rapidly this week amid mortgage-market fears. The decline has been so dramatic as to create speculation about a possible bailout and government takeover of the mortgage finance companies, which hold $5 trillion in loans between them.