The House of Representatives on Thursday gave a nod to a housing rescue bill that would provide tax credits to home buyers, allow homeowners to refinance their loans thanks to Federal Housing Administration backing, and enact reforms at Freddie Mac, Fannie Mae, and the Federal Home Loan Bank system.

Builders nodded enthusiastically at the tax credit provision, which would provide as much as $7,500 (depending on income) to those purchasing their first house. "The proposed tax credit in this bill will have a positive impact, especially for first-time home buyers," predicted Centex CEO Tim Eller, who said he purchased his first house in 1974 with a similar program. "I'm optimistic this bill will be the foundation for the legislation that Congress ultimately passes to help restore confidence in the housing market." 

The National Association of Home Builders (NAHB) agreed. "The tax credit is the most effective way to halt the downward spiral in the housing market and stabilize home prices and financial markets," says Sandy Dunn, who is a builder in West Virginia and the NAHB's president. "This will get consumers off the fence, stimulate home buying, and reduce excess supply in housing markets."

The House bill also includes a much-discussed plan that would allow financially strapped homeowners to refinance their home loans through the FHA. Under the bill, the FHA would back as much as $300 billion in new mortgages as long as lenders shared in the pain by slicing the loans' principal.

While some economists believe the FHA measure would bring much needed stability to the mortgage and housing markets, it remains a controversial provision, especially at the White House. "I will veto the bill that's moving through the House today if it makes it to my desk," President Bush vowed on Wednesday after meeting with Republican House leaders.

Before the bill arrives on the president's desk, though, a committee must resolve the differences between the House and Senate versions.

Alison Rice is senior editor, online, for BUILDER magazine.