Transcripts

Lack of Money Is Weighing Down The Housing Rescue Plan

SUSIE GHARIB: Key members of the U.S. Senate reached a tentative deal on a housing rescue plan late today. It could keep 500,000 at-risk borrowers in their homes over the next five years. As part of the agreement, Fannie Mae and Freddie Mac would backstop a fund aimed at insuring troubled mortgages. As Stephanie Dhue reports, how to pay for that fund is holding up a final deal.

STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: More than two million Americans will face foreclosure this year. Many lawmakers want to help more homeowners avoid that fate. Senate Banking Committee Chairman Chris Dodd says the housing bill is not a bailout.

SEN. CHRIS DODD, CHAIRMAN, BANKING COMMITTEE: It excludes lenders and borrowers who would game the system, the speculators, those who were not living in their own homes. It is only for owner occupants, not speculators and it avoids using tax dollars to backstop the mortgage insurance that the initiative provides.

DHUE: Dodd's bill would create a $300 billion fund allowing the Federal Housing Administration to buy troubled mortgages. Lenders would have to agree to take a loss on the existing loans to participate in the program. There's concern the proposal leaves out a large portion of troubled loans. Eric Halperin of the Center for Responsible Lending says homeowners who have a second lien on their property, as in the case of once popular 80/20 loans, won't be helped.

ERIC HALPERIN, CENTER FOR RESPONSIBLE LENDING: A lot of homeowners have a second mortgage on their property in addition to their first and under the Frank/Dodd plan, that second mortgage holder needs to voluntarily agree to release their mortgage on the property to allow this to go forward and that's been a real stumbling block to date for modification.

DHUE: The bill's proponents say it will act to stabilize home prices. But analyst Andy Laperriere says even if lawmakers can reach an agreement quickly, home prices may have already reached a bottom.

ANDY LAPERRIERE, MANAGING DIRECTOR, ISI GROUP: If we're basically already through it by the end of the year, only if things are going to get really rough and home prices are going to fall a lot in 2009, only under that scenario would the bill help.

DHUE: Paying for the plan has been a key issue throughout today's debate. While Dodd's proposal calls for taxpayer monies, some senators want mortgage-backed Fannie Mae and Freddie Mac to foot the bill. Meanwhile President Bush has threatened to veto any bill that shifts the burden to taxpayers. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.