The House has passed housing legislation to help homeowners threatened by foreclosure, including tax benefits to sweeten the package.
The package, passed by a vote of 266 to 154, includes mortgage-refinancing assistance to keep families from losing their homes. The bill expands a Federal Housing Administration program so more borrowers in danger of losing their homes can refinance into lower-cost, government-insured mortgages they can afford to repay. Only primary residences are eligible for assistance.
The bill also provides mortgage-servicing companies with protection against investor lawsuits if they modify the loans, strengthens regulation of Fannie Mae and Freddie Mac, and expands the role of the FHA.
An amendment, passed by a vote of 322 to 94, provides $11 billion in tax benefits, including tax credits to first-time homebuyers, a real-property tax deduction for non-itemizers, an additional $10 billion in mortgage revenue bonds for states and improved access to low-income housing.
First-time homebuyers receive a refundable tax credit that works like an interest-free loan of up to $7,500 (to be paid back over 15 years) to spur home buying and stabilize the market. The credit will begin to phase out for taxpayers with adjusted gross income in excess of $70,000 (or $140,000 in the case of a joint return).
The legislation also provides taxpayers that claim the standard deduction with up to an additional $350 ($700 for a joint return) standard deduction for property taxes in 2008. The bill offers a temporary increase in mortgage revenue bond authority to allow for the issuance of an additional $10 billion of tax-exempt bonds to refinance subprime loans, to provide loans to first-time homebuyers and to finance the construction of low-income rental housing.
There is also a temporary increase in the low-income housing tax credit and simplification of the credit to help builders create new options for families seeking affordable housing alternatives. The bill also helps returning soldiers avoid foreclosure by lengthening the time a lender must wait before starting foreclosure, from three months to one year after a soldier returns from service.
The Senate is working on its own version of the housing package, but faces a veto threat from the White House. However, some signs of a compromise have been developing, with expressions of support for several provisions from Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke.
