Mortgage Bill gets House Approval

The House of Representatives on Thursday approved legislation to create a $300 billion mortgage insurance fund designed to provide billions more in homeowner aid.

Despite several veto threats from President Bush, lawmakers passed the bill in a 266-154 vote. The bill which has been championed by House Financial Services chairman Barney Frank, D-Mass is hoping the mandate extended to the Federal Housing Administration (FHA) will help stabilize a housing market rocked by the credit crunch and a tide of foreclosures.

"This legislation, in short, will expand the FHA program so that borrowers in danger of losing their homes can refinance into lower-cost, government-insured mortgages that they can afford to repay," said Democratic majority leader Steny Hoyer.

In order to qualify a mortgage lender would have to cut the debt to no more than 85% of a home's current appraised value. If the FHA-refinanced loans went into default, the FHA would pay the lender the remaining principal owed.

The Congressional Budget Office estimates the FHA expansion program would cost taxpayers $1.7 billion. It also estimates the program could end up insuring up to 500,000 borrowers.

The next step is for the Senate to pass the bill, but even if does get approval, the still remains a significant threat of a veto by President Bush who claims the FHA expansion would force taxpayers "to take on excessive risk."