Mortgage proposal may whet appetites

WASHINGTON - Legislative efforts to address the housing crisis were overshadowed this week - but not stymied - by the Bush administration's promotion of an interest-rate freeze for some borrowers.

Analysts say the Bush plan, described by consumer groups and industry experts as limited in scope, will spur the Democratic-led Congress to more aggressively push proposals that have thus far stalled, including bills that would tighten lending standards and help bankrupt Americans keep their homes.

Sen. Christopher Dodd, D-Conn., is expected next week to introduce a long-awaited bill aimed at cracking down on lending abuses.

The Bush administration may have inadvertently re-energized Congress on the housing crisis by overselling the plan, said Bert Ely, a banking consultant based in Alexandria, Va., who is leery of government intervention.

"It's highly likely that we're going to hear a chorus of disappointment next spring," Ely said of the Bush plan. He worries that more far-reaching action - such as a mandatory, rather than voluntary, freeze on interest rates - could cut investment in the U.S. mortgage market, causing a flare-up of the credit crunch that hurt investors around the world this summer and fall.

When Congress returns from its break in January, "they're going to face a gravely deteriorating housing market" and the potentially severe economic fallout, which will provide more impetus for action, said Howard Glaser, a former housing official in the Clinton administration.

Plus, with an election coming next fall, both Democrats and Republicans will be under additional pressure to act, analysts said.

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source: enquirer.com