Politics is wild and woolly and never dull. While millions of Americans struggle with declining home values, the sub-prime fiasco and the huge credit crunch, Congress is trying “to do something”, but philosophies on what to do veer wildly across the spectrum.

There are 3 main camps. The White House, the Senate, and the House of Representatives each had their own “plan”. The White House is the most modest. Their philosophical view could be summed up as saying they want to help the truly deserving homeowner, without bailing out lenders (who made “bad” loans) – and without cost to taxpayers.

Their ancillary thought is that way too many people, who should have known better, were caught up in the hype of the roaring market a few years ago, thought they could make a quick buck by re-selling (or refinancing) a couple of years later, etc, etc. This school of thought says they never should have bought a home in the first place, but easy lending standards (or non-existent standards) enticed them. The thought is that the lenders who financed those easy credit loans to (normally) undeserving people should take the hit, along with the “reckless” borrowers.

So this week, President Bush announced that the government, through the FHA, would begin by providing government insurance for lenders to benefit homeowners who owe more on their mortgages than their homes are worth (“under water”) – IF the lenders agreed to write down the principal, giving the homeowner some equity in their home (and hopefully enticing the homeowner to continue making payments…). The President’s plan would help about 100,000 people.

The Senate (balanced almost exactly 50/50 between Republicans and Democrats) perhaps could be seen as being in the middle between the President and the Democratically controlled House. The House plan, led by Barney Frank (Dem.  MA) is huge compared to the White House plan – targeting maybe 2,000,000 to 3,000,000 “in trouble” homeowners.

The House bill (H.R. 3221) was brought before the Senate yesterday, but the Senate has their own version (S. 2636). The Senate passed 84 – 12 their version; now the differences between the House and Senate versions will be hammered out in committee. The thought is a bill, approved by both the House and Senate, can be delivered to President Bush next month for signature.

On a practical, local level, one proposal in these bills would provide a $7,500 tax credit for first time homebuyers who buy a foreclosure home (initially, it was $15,000 over 3 years). This may or may not come to pass as haggling takes place.

There is strong sentiment pro and con on these issues. Stay tuned!