Mortgage Relief. Amendment No. 1 to H.R. 3221 was passed 266-154 on May 8, 2008 (Roll Call 301). It would provide $300 billion in new authority for the Federal Housing Administration (FHA) to help borrowers facing foreclosure refinance into FHA-insured, fixed-rate mortgages, provided that mortgage loan holders are willing to take a write-down on the original value of a loan to allow refinancing to be on an amount not to exceed 90 percent of the current appraised value of the property.
Thus lenders who made unwise loans can do partial write-downs in order to offload to the government the risk associated with their loans most likely to be defaulted on. The plan is a bailout of both troubled lenders and borrowers, ultimately sticking taxpayers with the default risk. Moreover, the program would unfairly make a gift of partial home equity to borrowers facing foreclosure, a gift not offered to those who are managing to make their mortgage payments on time, have no mortgage, or who rent.
We have assigned pluses to the nays because the federal government acting as an insurer, micro-manager of markets, and wealth redistributor is unconstitutional. Also, the morphing of H.R. 3221 from an energy bill into a foreclosure prevention bill was a procedural travesty.
