Two Senate Finance Committee members tomorrow plan to offer an amendment to the panel’s economic stimulus package that would increase the private-activity bond volume cap by $15 billion and allow state and local finance agencies to issue bonds to help struggling homeowners refinance subprime mortgage loans, housing and congressional sources said.
Any such attempt by Sens. John Kerry, D-Mass., and Gordon Smith, R-Ore., would come after President Bush, in his State of the Union speech Monday, urged Congress to “allow state housing agencies to issue tax-free bonds to help homeowners refinance their mortgages.”
“We know that Kerry and Smith have filed an amendment and are working to build support for it within the committee,” said Barbara Thompson, executive director of the National Council of State Housing Agencies. “It is generating a lot of interest both at the leadership level at the committee and with the members, both Democrats and Republicans.”
Currently neither the $146 billion economic stimulus measure approved in the House by a vote of 385 to 35 yesterday or the proposal released by Senate Finance Committee chairman Sen. Max Baucus, D-Mont., contain such a provision.
But Kerry and Smith hope to add their legislative measure to the Baucus stimulus package during a vote on it today by the Finance Committee.
The bill — S. 2517 — proposed by the two senators in December would increase the private-activity bond volume cap by $15 billion and allow the extra capacity to be used for both refinancings of existing loans for eligible borrowers and for new loans for first-time homebuyers. States would be able to use the capacity for refinancings for three years. The proposal, which would apply to bonds issued after Dec. 31, 2007, would also exempt mortgage revenue bonds from the alternative minimum tax.
The Joint Tax Committee has estimated the proposal would cost about $2.4 billion, congressional sources said.
Currently the tax law only allows state and local governments to issue tax-exempt private-activity bonds, called qualified mortgage bonds, to first-time homebuyers.
But Kerry and Smith contend their measure would allow all states to issue more new loans based on the average loan amounts financed in those states in 2006, sources said. At least 34 states would be able to finance more than 1,000 new loans. The three states that would most benefit from the proposal would be Texas, which would be able to finance 10,374 new loans, New York, which could finance 8,521 new loans, and Florida, which could finance 7,300 new loans, according to the sources.
However, there is pressure from House members, the administration, and some senators to avoid adding more to the Baucus proposal, which is already broader than the package approved by the House.
Senate Majority Leader Harry Reid, D-Nev., said earlier this week that he “strongly supports” the Baucus proposal. However, other lawmakers have questioned whether the administration will go along with a stimulus package that is significantly broader than the one passed by the House, which was negotiated by House Democrat and Republican leaders and Treasury Secretary Henry Paulson.