Vote in Congress backs law to help subprime victims

The US Senate passed a bill yesterday that could help an estimated 200,000 homeowners avoid foreclosure, bringing lawmakers a step nearer to enacting legislation addressing the subprime mortgage crisis after weeks of deadlock.

The Senate bill raises the limit on the number of loans available through the Federal Housing Administration by allowing the federal agency that insures mortgage loans to halve the required downpayment for an FHA loan. It also increases the maximum allowable loan to $417,000.

The legislation passed on a 93-1 vote days after Harry Reid, the Senate majority leader, called on President George W. Bush to intervene in a long-running standoff with Republican lawmakers over the housing legislation.

The White House urged Congress to pass FHA reform when it unveiled its own industry-backed plan to address the housing meltdown. But the bill was stalled for weeks because of objections from Tom Coburn, a Republican senator. Hr said the FHA bill would create more liability for the government by leading to more, not fewer, risky loans.

Chuck Schumer, a New York Democratic senator, said: "It was past time to approve a proposal like this that can help a good number of Americans save their homes."

The Senate version of the legislation differs from the proposal passed in the House of Representatives, which has higher loan limits and more flexible downpayment standards. A White House spokesman said Mr Bush was pleased the Senate had passed the bill, but that he had "some concerns" with both versions. He is, nevertheless, expected to sign the bill into law once both houses agree on the final legislation.

Democrats feel that White House moves to tackle the mortgage crisis do not go far enough. But until yesterday, the Senate had failed to gather the political consensus needed to pass any legislation to address the housing meltdown.

http://www.ft.com/cms/s/0/cadc0304-aaaf-11dc-a779-0000779fd2ac.html