Senate Passes Housing Rescue Bill

The U.S. Senate on Saturday passed a bill that would stem foreclosures by allowing some 400,000 home owners refinance into affordable, government-backed loans.

The bill, strongly supported by the NATIONAL ASSOCIATION OF REALTORS®, passed by a margin of 72-13. The House of Representatives approved the bill on Wednesday in a 272-15 vote.

"This bill must get to the president quickly, and we urge him to act immediately to sign it into law," NAR President Dick Gaylord said in a statement last week.

NAR says the bill will help bring stability to the housing market and put a dent in the rising rate of foreclosures.

The program will be run by the Federal Housing Administration, and will insure up to $300 billion in refinanced 30-year, fixed-rate loans. The mortgages can't be for more than 90 percent of a home's newly appraised value.

For mortgages that exceed the value of the home, the lender would have to voluntarily write down the principal to the qualifying level. If the home goes up in value, the borrower must share newly created equity with the FHA.

Experts say the success of the program depends on how receptive banks are to writing down a portion of the loan.

If passed into law, the program will begin Oct. 1 and end Sept. 30, 2011. Borrowers won't be able to qualify if they have intentionally defaulted on their loans or if they had a debt-to-income ratio of less than 31 percent as of March 1.

Source: Associated Press, The Wall Street Journal, NAR