Home builders and the mortgage industry are emerging as big victors in a bipartisan agreement reached by Senate leaders on legislation designed to limit the housing crisis.
The $15 billion Foreclosure Prevention Act of 2008 is drawing fire from critics who say it would do little to actually prevent foreclosures. The bill contains a $6 billion emergency tax break that would let companies use losses from 2008 and 2009 to offset profits earned over the preceding four years, instead of the usual two-year timeframe.
That's good news for big home builders such as KB Home and Pulte Homes Inc., which have been saddled with massive losses over the past year.
Jerry Howard, chief executive of the National Association of Home Builders, said in an interview that the tax break will keep many small home builders out of bankruptcy, he said, and will prevent large builders from having to liquidate assets.
Other big beneficiaries would be Wall Street banks such as Citigroup Inc., Merrill Lynch & Co. and Morgan Stanley. In fact, any company now struggling after years of healthy profits that pumped up their tax bills could benefit.
Earlier this year, the home builders association was so dissatisfied by lawmakers' actions - notably not including the tax provision in the economic stimulus bill - that it snapped shut its political purse. NAHB said it would stop making contributions to congressional candidates "until further notice."
Since 1990, the trade group has given nearly $20 million to federal candidates, with 35 percent going to Democrats and 65 percent to Republicans, according to the Center for Responsive Politics. The bill also contains $4 billion in grants to local governments to buy and refurbish foreclosed homes, new authority for states to issue bonds to be used to refinance subprime mortgages - those made to borrowers with poor credit - and a $7,000 tax credit for people buying properties in foreclosure.
It includes an additional $100 million - half of what Democrats proposed - for credit counseling to help homeowners avoid foreclosure. And the agreement permanently raises the limit for loans backed by the Federal Housing Administration to $550,000. That amount had been temporarily raised to nearly $730,000 in some areas of the country as part of the economic stimulus bill signed by President Bush in February.
Homeowners facing bankruptcy, however, won't find relief in the proposal.
The mortgage industry fought fiercely to spike a provision to let bankruptcy judges rewrite the terms of distressed mortgages. It won that battle by a 58-36 vote.
The Mortgage Bankers Association said it would have hurt more borrowers in the long run by requiring higher interest rates and larger down payments to offset the risk of bankruptcy court intervention.
