The Middle Class Supports. With two million families facing the loss of their homes over the next two years and large sectors of the U.S. economy destabilized by mortgage defaults, the foreclosure crisis and the wider turmoil it has caused are among the greatest threats to middle-class Americans today. This bill responds to that threat, although not in the most effective way. The bill is stuffed with costly and irrelevant provisions, while the positive steps it does include fail to go far enough to help struggling families. The single most effective measure proposed to address the crisis – a change in bankruptcy law that would prevent hundreds of thousands of foreclosures – was killed as an amendment. Meanwhile some provisions that did make it into the final bill could even make the foreclosure problem worse.

Positive measures in the bill include FHA modernization, which will enable more homeowners to refinance problematic mortgages. The block grants for communities hard hit by the crisis to reclaim foreclosed properties and turn them into affordable homes is another very positive step, but here too the amount of funding may be too little to revitalize neighborhoods in need. Funding for mortgage counseling is also beneficial, but inadequate. And while enhanced mortgage disclosures are helpful, they are no substitute for a genuine ban on deceptive lending practices along the lines enacted by some state governments. The tax exempt bonds for state agencies to refinance subprime loans is a modest effort which will inevitably bail out lenders, whose lax standards helped cause the crisis, along with struggling homeowners.

While provisions to help homeowners and devastated communities are stingy, home builders and other businesses facing economic losses due to the downturn reap $6.1 billion in tax breaks. This provision has little to do with helping prevent foreclosure and is not even a cost-effective means of economic stimulus. The property tax deduction for non-itemizers is similarly problematic. While many middle-class families might see a small tax break under this provision, the credit is not substantial enough to help families who face foreclosure or are having serious difficulties making mortgage payments and is not targeted at these homeowners. To make matters worse, the deduction is limited to people who live in areas that have not raised property taxes. This creates an incentive for states and municipalities to cut services that middle-class families rely on rather than raising the revenue needed to preserve them. Finally, the tax credit for buying a foreclosed home might, as the Washington Post point out, actually encourage more home foreclosures.

The alternative energy tax breaks, added at the last minute, are similar to those included in the House’s Renewable Energy and Energy Conservation Tax Act. Providing the public investment necessary to jump start the development and promotion of renewable energy sources and ultimately mitigate global warming sweetens what is otherwise a unsatisfactory effort to deal with the home mortgage crisis. Middle-class Americans will ultimately see some benefit from this bill – but they deserve better.