U.S. Capitol Building
U.S. Capitol Building - 
Listen To The Story


KAI RYSSDAL: The Senate has taken its first crack at helping homeowners mired in the subprime mess. Lawmakers are hoping a bill passed today will help jump-start the stalled housing market. Marketplace's Nancy Marshall Genzer reports.

NANCY MARSHALL GENZER: Subprime slime has rubbed off on all home buyers -- even people with decent salaries are having trouble getting loans. But under the Senate bill the Federal Housing Administration would insure many more loans. So the bank won't be stuck if you can't make your payments.

Standard & Poors Chief Economist David Wyss says if it's weren't for the subprime mess, these buyers would be considered a good risk.

DAVID WYSS: We're talking about people who have maybe not the best credit rating in the world, maybe they don't have enough for the downpayment, but they're basically sound, and can afford the house. This allows them to buy it.

That's because the bill also slashes the minimum down payment for an FHA-insured loan to only 1.5 percent. David Berenbaum of the National Community Reinvestment Coalition says the bill goes back to providing borrowers with the basics.

DAVID BERENBAUM: It's a stable, fixed rate. They know that they'll be qualified based on their individual financial and credit characteristics and that there's oversight in the loan process to ensure the quality of the product.

And one other thing? The Senate bill lets the FHA insure loans of up to $417,000. That worries banking consultant Bert Ely. He hears a whiff of "play it again, Uncle Sam" -- more huge loans with little money down.

BERT ELY: Because, again, if someone is that tight financially that they can't even come up with more than just a token downpayment, then the question is do they have the income to carry the mortgage?

Congress thinks they do.

In Washington, I'm Nancy Marshall Genzer for Marketplace.