Pre-foreclosure counseling would be beefed up with a $100 billion fund for the Neighborhood Reinvestment Corp. Truth-in-lending disclosure would be expanded to ensure that borrowers know the maximum monthly payment possible on their loans.

Soldiers returning from war facing foreclosure would be protected by a requirement for lenders to wait nine months, rather than three, to initiate such action. Veterans would also get one year's grace from increases in their mortgage rates. The Department of Defense must also establish a counseling program to assist any who face financial difficulty.

A standard property tax deduction of $500 for singles and $1,000 for joint filers who do not itemize their tax returns is also included.

Mark Zandi, chief economist for Moody's.com and a keynote speaker at the upcoming America's Credit Union Mortgage Association conference in Nashville, was underwhelmed by what the legislation might do to stem rising foreclosures. "I don't think it's going to be enough to solve the housing problem, at least not in 2008," he said. Allowing that it was measured progress but not enough to have a much-needed effect, he called the steps small but not nearly big enough.

Criticism of the bill centered on the assistance offered to developers and lenders, the very groups many perceive as causing the crisis in the first place. A provision to permit homebuilders to reclaim taxes paid up to four years ago rather than the two-year period now allowed was cited as one item and the dropping of an amendment to allow bankruptcy judges to rework mortgages was another.

The bankruptcy amendment was offered by Senator Dick Durbin (D-Ill.) and was roundly opposed by banker trade groups and most Republicans. Durbin had scaled back the measure after conferring with NAFCU–among other groups–to only include subprime mortgages on p

rimary homes and limiting the time frame to exclude new filings.

"This amendment would introduce too much risk into the marketplace," said Senator Sam Brownback (R-Kan.). It could cause mortgage interest rates to rise as much as one-to-two percentage points, he said. "It will do harm." Durbin withdrew the amendment to allow the broader package to move.

Reaction from some consumer groups was swift. "Current law excludes homeowners from relief available to yacht owners and subprime lenders," said the Center for Responsible Lending, Durham, N.C. (www.responsiblelending.org). "Current law makes a mortgage on a primary residence the only debt that bankruptcy courts are not permitted to modify in Chapter 13 plans." The option would cost the Treasury nothing but help desperate homeowners and speed the recovery of neighborhoods with many foreclosed homes, it said.

The Laborers' International Union of North America (LIUNA) was so angered over the tax break for builders that it started a radio ad campaign against it. "Senators patted themselves on the back claiming to have found a bipartisan solution to help struggling homeowners facing foreclosure," LIUNA General President Terence M. O'Sullivan said. "But as the details are revealed, we are seeing that by any measure at least a third to more than half of the bill is a taxpayer-funded handout for those at fault. This bill needs to live up to its name."

LIUNA (www.liuna.org) said that if the carry back provision remains, the largest corporate homebuilders, who pushed subprime loans through their mortgage subsidiaries, would gain the most. For example, Lennar could get back $573 million, D.R. Horton could get $607 million and Pulte could get $598 million. Other corporate homebuilders, such as Centex, NVR, KB Home, Toll Brothers, Ryland, MDC, Beazer and Standard Pacific, stand to gain over $100 million as well, it said.

NAFCU Director of Legislative Affairs Brad Thaler said that should the Senate approve this package, it may seek to have a bankruptcy amendment offered on the House floor when House Financial Services Committee Chairman Barney Frank's (D-Mass.) housing bill is offered. "We've seen Speaker of the House Nancy Pelosi say that more needs to be done to help homeowners, apart from the draft bill Barney Frank has put out, so the mortgage bankruptcy issue may be looked at again."

Senator Bernie Sanders (I-Vt.) offered an amendment to cap all interests rates, including those on mortgages, credit cards and payday loans, at 14%. Offering biblical references and classical references to usury, Sanders said, "The bible speaks of usury as sin, and Dante reserved a special place in hell-the inner ring of the seventh circle-for usurers. It's an outrage for Americans to be paying rates as high as 21% to 40% when credit card companies reported $90.1 billion in interest income alone." The amendment failed.

A plan to allow the FHA to guarantee up to $400 billion in refinanced loans was also removed due to pressure from banking lobbyists because it would have required lenders to lower mortgage amounts to existing home values, incurring a loss. Fed Chairman Ben Bernanke made this suggestion in a speech before the Independent Community Bankers of America some weeks ago, and it received a lukewarm reception.

The Senate is expected to pass the measure after invoking cloture, a motion requiring 60% of senators voting in favor of ending a filibuster. Separately, Frank has scheduled hearings on his plan, titled, "Using FHA for Housing Stabilization and Homeownership Retention."

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