Housing assistance legislation gaining momentum in U.S. Congress

The bill, which has bipartisan Senate support, includes a new, standard property tax deduction for up to $1,000/$500 for all couples/individuals who file taxes, not merely those who itemize their deductions, and provides $10 billion in tax-exempt bonds for local housing agencies to refinance loans and provide mortgages for first-time buyers, among other provisions, The Times reported.

Meanwhile, in the U.S. House of Representatives, where the Senate bill is headed, U.S. Rep. Barney Frank, D-Massachusetts and chairman of the Financial Services Committee, will hold hearings on a plan to provide up to $300 billion in federally-guaranteed loans to help up to 1.5 million homeowners at risk of default, The Wall Street Journal reported (subscription required).

Under Frank's proposal, borrowers would have to certify that they are truly in danger of default and not intentionally defaulting when a default could be avoided, simply to take advantage of more-favorable mortgage terms that the Federal Housing Administration would guarantee, The Journal reported.

Political Analysis: If Democratic Party history and case study is any precedent, look for Rep. Frank, et al., to win concessions from the Senate to broaden eligibility assistance beyond what the Senate bill provides. However, it's highly unlikely Rep. Frank will be able to secure a $300 billion FHA guarantee provision. A $125-150 billion guarantee -- $62.5-75 billion each year for 2008 and 2009, with a more-rigorous means test to identify those homeowners truly in danger of default, is more likely. Initially, the talk inside the beltway was that President Bush would oppose the FHA guarantee. But given the deepening housing slump -- and the electoral pressure incumbent Congressional Republicans are likely to face in the 2008 election absent an assistance program -- Bush may very well sign the measure.