FOR IMMEDIATE RELEASE:
· One of the most contested components of the bill is a $25 billion tax break to homebuilders and other housing industry businesses that have suffered major financial losses due to the current crisis.
· Supporters praise that section of the bill for extending the government’s recent bailout of investment firms on Wall Street to include those hurt most by the mortgage and housing debacle -- namely, builders and developers.
· But critics say the bill unfairly rewards businesses that took intentional and calculated risks, while it diverts critical money away from the rescue of homeowners and their families facing foreclosure.
Also written into the bill is a $7,000 tax credit for the purchase of foreclosed homes. Investors who accept the risk of buying foreclosures would be rewarded with this large tax break, a move that supporters of the measure say would stimulate the economy while helping to stimulate the housing market and combat blight in neighborhoods plagued by a high volume of foreclosures. Many of these homes sit vacant, deteriorate, and become the target of vandalism, arson, or squatters.
· But others argue that the tax credit should not add to the profit margins of investors, but should instead be offered to those who are actually losing their homes.
· They contend that investors will buy bargain basement-priced foreclosure properties anyway, so the tax break will do nothing to proactively change the market dynamics.
· They also point out that such an incentive would give a financial motivation to banks to follow through with more foreclosures and then buy them back as investments qualifying for a sweet tax perk subsidy.
Although President Bush has indicated that he may veto the bill, he does support a provision within it that sets aside $10 billion in tax-free mortgage revenue bonds to help homeowners refinance subprime loans. The bill also offers $180 million for pre-foreclosure counseling, increased disclosure requirements, and increasing the length of time a lender must wait before beginning foreclosure proceedings on a home owned by returning war veterans, and permanently raising the amount of the maximum mortgage that can be backed by the Federal Housing Administration.
A competing House version of the Senate bill comes at the problems from a different direction, and steers most of the tax incentives toward first-time homebuyers or those who invest in affordable housing for low-income Americans.
Rep. Barney Frank, D-Mass., the Financial Services Committee chairman, is also pushing for inclusion of provisions that would let the FHA insure $300 billion in refinanced loans, another effort to help homeowners get out of troublesome mortgages and thereby sidestep foreclosure.
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