Transcripts

Democrats & Republicans Join Together To Search For A Solution To The Housing Crisis

PAUL KANGAS: The housing crisis took center stage in Washington today, with Senate Republicans and Democrats agreeing to work together to craft a solution to the wave of foreclosures sweeping the nation. As Stephanie Dhue reports, a blueprint is in the works and could be on the table by tomorrow.

STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: With rising foreclosures and freezing credit markets, lawmakers pledged to work together to forge a housing solution. By midday tomorrow, Senators Chris Dodd and Richard Shelby are expected to outline a bill that addresses the mortgage meltdown. Senator Dodd says the package will deal with the core issues in the housing market.

SEN. CHRIS DODD, CHAIRMAN, SENATE BANKING COMMITTEE: The most important word in all of this is the restoration of confidence in my view, not only for homeowners, but others involved in the financial services sector of our country.

DHUE: The most controversial proposal the Democrats support would change bankruptcy laws to let judges modify interest rates and terms for primary homes. Eric Halperin of the Center for Responsible Lending says that proposal is critical because many times different parties own parts of mortgages. Bankruptcy judges can force everyone to work together.

ERIC HALPERIN, CENTER FOR RESPONSIBLE LENDING: Bankruptcy is a key part of it, because if you don't have that program that gives people a recourse, that gives the court the ability to order it, we're not going to be able to get rid of all these obstacles to modifications.

DHUE: The industry calls bankruptcy loan workouts cram downs. The Mortgage Bankers Association says cram downs would lead to higher interest rates for all borrowers. Nevada Republican John Ensign agrees.

SEN. JOHN ENSIGN (R) NEVADA: Banks are going to have to take into account risk on loans and if they think that bankruptcy judges in the future can raise or can lower interest rates, it increases their risk. It increases the cost to them.

DHUE: Other proposals that may be included in a bill, funding counseling programs for struggling homeowners, money for states and local governments to buy foreclosed properties and an expanded role for the Federal Housing Administration to refinance bad loans. While there is disagreement on the specifics of just how to address the housing crisis, both parties seem to agree at this point something has to be done. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.