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August 1, 2014

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Republicans defy dogma, soften on mortgage help

Nevada’s Ensign, a Reagan admirer, comes around to aiding homeowners

Sen. John Ensign sat in his Capitol office Tuesday, images of Ronald Reagan peeking out from photos and bookshelves, to discuss something alien to the former president: government intervention in the mortgage mess.

Fresh from two weeks at home, where the housing crisis tops concerns, Ensign and other Republicans returned to Washington with a newfound willingness to insert themselves as a force in the marketplace.

Ensign heard from constituents in Nevada, where one in every 165 homes is in foreclosure. He heard from investors during fundraising trips to New York City, where Wall Street is eagerly awaiting Washington’s next move.

For a student of the modern conservative movement, swept into office during the Republican revolution of 1994, the meltdown in the housing sector means it’s time for both Democrats and Republicans “to start putting your country first, before your party,” he said.

“I’m a free market person, but there are times ... government can help,” Ensign told a few reporters. “You just have to be careful how much you do.”

Senators voted 94-1 on Tuesday to craft a plan to address the foreclosure crisis. Today they will begin considering various proposals to help families keep their homes and prevent the broader economy from further downturn.

The nearly unanimous vote was a political shift from just one month ago when Republican senators, backed by President Bush, blocked Senate Majority Leader Harry Reid’s housing relief package.

Stan Collender, a longtime federal budget watcher who writes a weekly column for the Capitol Hill newspaper Roll Call, said Republicans sensed a political and policy shift after the Bush administration helped prop up Bear Stearns, the investment giant that essentially crumbled under the weight of its problematic mortgage dealings.

The aid to Bear Stearns left homeowners wondering what Washington would do for them. “It was going to be tough for politicians to avoid having to help individual homeowners,” he said.

“Whenever you get something this big ... that’s what gives politicians, elected officials, pretty strong incentive to move from their expected position.”

Whether a deal in Congress can be reached remains uncertain. Ensign himself says he may not vote for the final product unless it’s just right.

The parties seem likely to find common ground on the modest proposals — increased funding for mortgage counseling programs and a provision to allow local housing authorities to get into the refinancing business.

But Republicans remain opposed to a signature Democratic provision that would allow judges to write down mortgages for homeowners in bankruptcy court.

Democrats say 600,000 families could have their mortgages adjusted to avoid foreclosure, as is commonly done for owners of vacation — or second — homes who run into financial difficulty. Republicans, however, argue that bank losses will push interest rates higher for everyone else.

Republicans also oppose a Democratic provision to provide local communities with as much as $4 billion nationwide to buy and refurbish foreclosed homes. Republicans back a proposal to offer a $15,000 tax credit to buyers of new or foreclosed properties.

Ensign said he has no interest in helping speculators in Las Vegas, who were scooping up multiple homes during the buying frenzy. But helping homebuilders move their product by offering the tax credit to buyers “seems to make some sense.”

“It wasn’t their fault they were building to meet a demand out there,” he said, acknowledging, “the demand might have been false.”

What would the icon of the conservative movement, that former president hovering in the office, say about his student’s work?

Reagan would understand, Ensign said.

This mortgage crisis, the way loans were packaged and resold around the globe, “is a situation the world’s never seen before,” he said. “Because there wasn’t the regulatory agencies put in place to make sure that things were done right and valued correctly and all that, it needs to have not only a market correction, it needs to have something that dampens the effect,” Ensign said.

Even Reagan understood, he said, that once in a while the free market needs a helping hand.

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