Don’t hold your breath waiting for mortgage relief from Washington, D.C. The House has passed a bill that would offer FHA-insured mortgages to replace existing high-interest adjustable rate loans on these conditions:

•  The homeowner owns no other home
•  The mortgage was originated no later than the end of 2007
• The homeowner certifies they haven’t defaulted intentionally or obtained the loan fraudulently (ok, maybe that is not too restrictive)
• The mortgage payment is greater than 35% of the homeowners monthly income
• The homeowner does have sufficient income to cover the reduced mortgage payments
• The lender will accept no more than 85% of the home’s current value to pay off the outstanding debt (lenders as well as taxpayers will take a hit)
• Homeowner agrees to give a share of profits to FHA when the home is sold (the homeowner loses some of the advantage of home appreciation as part of the deal)
• The homeowner agrees not to take a second mortgage for five years, except for home improvements (no more using the home as a piggy bank for cars, boats, or groceries)

This bill would allow some people facing foreclosure to stay in their homes (defined as their primary residence), but will not bail out investors, speculators, or second homeowners. Still, don’t count on it becoming law. The Senate has not yet voted to approve it and President Bush is threatening a veto if it does pass the Senate.

Like so much else caught up in the partisan divide that has come to characterize our political process, this legislation is more likely to die than be enacted. The Democrats in Congress and the party's presidential candidates are trying to pose the debate as doing at least as much for beleaguered homeowners as the government is doing for Wall Street. The White House and most House Republicans argue that the proposal amounts to using taxpayer money to reward bad behavior.

Senator Barak Obama supports the House Bill. His campaign says they “weighed the downsides of rewarding bad behavior against the economic harm risked by inaction…. The issue [according to a campaign spokesman] is the threat that dropping home prices pose to the entire economy.” Like a good politician, Sen. John McCain, the Republican presidential candidate, advocates government-backed mortgages for some homeowners, but laces his campaign rhetoric with a "no bailouts" mantra. These positions are as reported in The Wall Street Journal Real Estate Section.

The upshot is deadlock. For more, on this topic, listen to today’s The Diane Rehm Show “Congress vs. The White House” -- podcast link below.