LawyersUSA

The House has passed a homeowner rescue plan designed to provide cheaper, government-backed mortgages to half a million debt-ridden borrowers and bolster an economy crippled by the subprime-fueled housing crisis.

The House approved the measure (H.R. 5818, "The Neighborhood Stablization Act of 2008") by a vote of 266-154, with 39 Republicans supporting it.

But President George W. Bush, joining opponents of the plan who say more prudent homebuyers and renters shouldn't be called upon to bail out borrowers who gambled on ever-rising housing prices and lost, has promised a veto of the measure – and it is unclear whether Congress will have the votes to override it.

Despite veto threats, the House voted on May 8 to let the Federal Housing Administration take on up to $300 billion in new mortgages so that financially strapped borrowers facing foreclosure could refinance.

The cornerstone of the measure is a plan, authored by Rep. Barney Frank, D-Mass., that would help borrowers facing imminent defaults with loans backed by the Federal Housing Administration.

For example, a homeowner who owes $290,000 on a house now worth $225,000 could refinance into an FHA-backed loan if the mortgage holder was willing to take a loss of about 36 percent. The borrower's monthly mortgage payments would fall from $2,200 to about $1,200.

"Foreclosures have caused and are causing serious economic problems," said Frank, who chairs the House Financial Services Committee.

But with uncertain support for the measure in the Senate and a promised veto from the White House, the prospects for the legislation remain far from clear.

"House Democrats passed bills that they know will never become law. Most Americans understand that we shouldn't create a taxpayer-funded bailout for lenders and speculators," said Tony Fratto, a White House spokesperson.