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US unveils mortgage rescue plan

Jaimie Kanwar

There is new hope today for hundreds of thousands of homeowners battered by the US mortgage crisis.

The House of Representatives has now passed a huge housing rescue bill which could help struggling homeowners get cheaper loans.

The vote on almost £2bn in so-called community grants to buy up and repair repossessed homes came after the White House announced that President Bush had dropped his threat to veto it.

The bill will now go to the Senate for approval before being signed into law.

Under the rescue plan, hundreds of thousands of homeowners trapped in mortgages they cannot afford on homes that have fallen in value would be able to refinance their mortgages with more affordable, fixed-rate loans backed by the Federal Housing Administration.

It also includes a tax break of just over £3,000 for first time home buyers, as well as help for troubled mortgage finance providers Fannie Mae and Freddie Mac.

Keeping the two firms open is seen as crucial to the functioning of the housing market, since between them they own or guarantee half the entire mortgage debt in the US.

The bill hands the Treasury Department the power to extend Fannie Mae and Freddie Mac an unlimited line of credit and to buy an unspecified amount of their stock if necessary

More than a million people have lost their homes in the wake of the biggest problems since the Great Depression.

This, in turn, has triggered the global credit crunch, the knock-on effects being felt around the world.