Foreclosure aid bill facing veto threat

20 Jun 2008 // The Senate signaled overwhelming support for a foreclosure rescue bill despite a presidential veto threat and concerns that it could benefit the very lenders responsible for the expanding national crisis.

Republican opponents of the bill sought to return the bill to the Banking Committee to clarify whether Countrywide Financial Services, or any other lender, was gaining a benefit from the bill in a not-too-subtle partisan attack on the Democratic architect of the bill.

"There have been very serious concerns raised about actions taken by Countrywide and we need to know what they stand to gain from this bill," Sen. Jim DeMint, R-S.C., said in a statement. Sen. Jim Bunning, R-Ky., called for a motion to send the bill back to committee, but it was rejected 70 to 11. Two earlier votes on amendments that would have gutted the legislation were rejected by veto-proof margins.

Banking Committee Chairman Chris Dodd, D-Conn., and Budget Committee Chairman Kent Conrad, D-N.D., have come under intense scrutiny since a magazine reported last week that they received special treatment from Countrywide on personal loans.

Dodd and Conrad were among a handful of powerbrokers that Countrywide CEO Angelo Mozilo reportedly offered lower-rate loans as well as waiving fees and points when they refinanced mortgages.

Dodd said he received no special treatment that he knew of, although he acknowledged being told that he was in a VIP program that he assumed was because
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he already had a mortgage with the company and had excellent credit.

"I don't believe I did anything wrong," Dodd said. "We negotiated a mortgage at the prevailing rate."

The 4.25 percent five-year adjustable rate mortgage on his D.C. home and 4.5 percent 10-year adjustable rate mortgage on his Connecticut home fell within the range of competitive rates that others with similar credit histories were receiving at the time.

He insisted that he and his wife were able to negotiate fee waivers to obtain lower rates when rates dropped because they were not locked in and could have turned to competitors.

Dodd said that they already had loans with Countrywide since purchasing their D.C. home in 1999 and had also shopped around with other lenders when they decided to refinance in 2003.

But Citizens for Responsibility and Ethics in Washington has sent official complaint letters to the House and Senate ethics committees seeking an investigation. And some House and Senate Republicans are urging a full investigation.

Sen. Richard Shelby, R-Ala., the ranking Republican on the Banking Committee, urged rejection of Bunning's motion, saying that the foreclosure rescue bill offered no benefit to Countrywide or any lender.

"There is no special treatment for any lender in the bill," he said. "This is not a bailout."

Administration officials said they oppose $4 billion in the measure to help states buy and rehabilitate foreclosed properties and a plan to have government-sponsored mortgage giants Fannie Mae and Freddie Mac pay for the rescue.

Dodd and Shelby issued a statement in response to the veto threat, saying they believe the legislation "represents a compromise that will bring relief to hundreds of thousands of homeowners and the housing markets without putting the American taxpayer at risk."

The bill would provide $300 billion in new, cheaper mortgages for distressed homeowners who otherwise would be considered too financially risky to qualify for government-insured, fixed-rate loans.

Borrowers would be eligible if their mortgage holders were willing to take a substantial loss and allow them to refinance, and would ultimately have to share with the government a portion of any profits they made from selling or refinancing their properties.

The measure is designed to help hundreds of thousands of borrowers in danger of losing their homes, but it also would benefit mortgage holders by allowing them to avoid costly foreclosures and reclaim some of what they're owed by people facing financial ruin.

The bill would tighten controls on Fannie Mae and Freddie Mac — which provide huge amounts of cash flow to the mortgage market by buying home loans from banks — creating a new regulator for the firms.

It also would provide a $14.5 billion array of housing and other tax breaks, including a credit of up to $8,000 for first-time homebuyers who buy a home in the next year and boosts in low-income tax credits and mortgage revenue bonds.

A group of 28 House Republicans wrote to Speaker Nancy Pelosi, D-Calif., on Thursday demanding an investigation — with open hearings — on the Countrywide allegations.

"At a time when millions of Americans are struggling to repay their mortgage debts while coping with $4 per gallon gasoline and soaring foods prices, they will be outraged to learn that some members of Congress may have personally profited from their official positions through secret sweetheart deals on their mortgages," said the letter, signed by House leaders. "Although there is no evidence that has arisen to suggest direct quid pro quo dealings, it is extremely troubling that these revelations of preferential treatment have emerged at a time when Congress is considering multiple legislative proposals affecting the mortgage lending industry."

House Financial Services Committee Chairman Barney Frank, D-Mass., said Thursday that the Senate ethics panel was investigating whether Dodd and Conrad received preferential loans from Countrywide.

"My view is that these allegations should be considered by the appropriate bodies, and I understand that the Senate Ethics Committee has already begun to look into the matter," he said in a statement.

While he agreed that it was appropriate for the Ethics Committee to investigate, Frank defended Dodd, whom he has worked closely with since Democrats took control of the House and Senate in 2006. "At no point in any of our joint efforts has Sen. Dodd shown even the slightest indication that he was in any way influenced by considerations, other than what was best for the economy and the American people," Frank said.