DEBORAH AMOS, host:
It's MORNING EDITION from NPR News. I'm Deborah Amos, in for Renee Montagne.
STEVE INSKEEP, host:
I'm Steve Inskeep. Good morning.
On the surface, the case for a major housing bill seems obvious.
Representative MAXINE WATERS (Democrat, California): This bill is about stabilizing this economy, and we cannot afford to have the largest two semi-government agencies unprotected.
INSKEEP: That's Congresswoman Maxine Waters, one of the sponsors of the measure the House approved yesterday. It includes aid for homeowners and also for the big mortgage companies Fannie Mae and Freddie Mac. But before it passed, the spending drew skepticism from Republican Representative Michele Bachmann.
Representative MICHELE BACHMANN (Republican, Minnesota): Ninety-five percent of all Americans are paying on time their mortgages, their rents. They weren't a part of this very bad equation, but they're being asked to come in to have their taxes raised to bail out irresponsible lenders and, yes, even some irresponsible borrowers.
INSKEEP: NPR's Brian Naylor is following this story, joins us now. Brian, good morning.
BRIAN NAYLOR: Hi, Steve.
INSKEEP: And, Brian, I have to ask, what changed this bill from a measure that had been talked about for several months to something that suddenly has to be passed right away?
NAYLOR: Well, right. I mean, Congress had been struggling for a while over what to do about the housing crisis. It threatened some one-and-a-half million Americans with foreclosure this year. What really provided the final push, Steve, was the crash of the Fannie Mae and Freddie Mac stocks. The administration pushed Congress to come to the rescue of those two institutions that back some $5 trillion worth of mortgages together, and I think that's what got us to where we are today.
INSKEEP: Well, given that the Fannie and Freddie package is now attached to this big housing bill, does that mean President Bush has to sign it even if he doesn't like parts of it?
NAYLOR: Well, that's exactly right. He had been threatening to veto the bill because in part of the provision that Congresswoman Waters sponsored that would provide money for communities to buy foreclosed homes, he called that a part of bailout of speculators and banks. But he was persuaded by Treasury Secretary Henry Paulson that it was important to act quickly because of the Fannie Mae/Freddie Mac situation. And so to avoid a prolonged veto fight, which the White House insisted they would've won, the president gave in.
So, what that meant was that the Democrats got some things that they wanted, and so did the president - a little bit of compromise.
INSKEEP: Brian Naylor, you just mentioned that there's money in here to help communities buy foreclosed homes. What else would this bill do?
NAYLOR: Well, it does a couple of different things. First, there's the rescue for Fannie Mae and Freddie Mac. It gives the two institutions an unspecified line of credit and enables the government to buy equity in them. The idea is to give investors some assurances that Fannie and Freddie will have access to more capital should they need it.
The bill also provides several hundred thousand homeowners on the brink of foreclosure with a chance to get new mortgages - that is, if their banks will agree to take a loss - and it provides nearly $4 billion to communities to buy foreclosed properties.
And there's a lot of other things in the bill, too. There are tax credits to encourage first-time homebuyers and there's also a new regulator for Fannie and Freddie.
INSKEEP: New mortgages if banks agree to take a loss, meaning there's an opportunity, but not a requirement that people get to renegotiate their mortgage terms.
NAYLOR: Exactly. It's completely voluntary. What would happen is the banks would have to agree to write down - they would have to agree to basically refinance on the basis of 90 percent of the houses' value. That means they they'd have to take a loss on this.
INSKEEP: Brian, one other thing: the cost. Let's go back to that question that Congresswoman Bachmann referred to at the top. What are some of the numbers that are thrown around about how much the taxpayer is on the hook for here?
NAYLOR: Well, there were a lot of numbers flying around in the debate, depending if you were on the side of railing against massive bailouts or assuring skittish investors that all is well. People talked about $300 billion. Well, that's the amount of the loans the government will back for homeowners facing foreclosure. But the final cost to taxpayers of that part is quite a bit less - maybe $2 billion in total.
INSKEEP: Because the loans will be repaid, hopefully. Yeah.
NAYLOR: Well, exactly. And then no one knows what the cost of the bailout for Fannie Mae and Freddie Mac will be. The Congressional Budget Office says there's better than even odds that it won't cost taxpayers anything. Maybe it'll cost $25 billion. There's a slight chance it could cost $100 billion. No one really knows. It depends on what happens with the stock market and if investors feel secure enough about Fannie and Freddie's future.
INSKEEP: Okay. Thanks very much. That's NPR's Brian Naylor. Transcript provided by NPR, Copyright NPR.
