Proposal to Pay Others' Debt Tossed Out

Middle class outrage has killed a plan that would've helped first time home buyers in Houston increase their credit score.

The "Credit Score Enhancement Program" propoed to give up to $3,000 for individuals who needed to pay down debt, such as student loans or hospital bills, according to the Mayor's office. Frank Michell with the city says the funds would not be used to pay down debt on car loans or credit card balances.

City officials has said the debt reduction could provide the slight boost in credit scores some applicants need in a tighter credit market.

But thousands of emails and calls at city hall killed the plan even before council members could vote on it Wednesday.

The $440,000 set aside for the credit enhancement program will now go back to the Hurricane Ike recovery fund—a place some council members say it should've never left. The money was leftover from the city's $1.5 million appropriation for emergency home and roof repairs from Hurricane Ike, a local newspaper reported Tuesday.

Councilwoman Anne Clutterbuck said the program was well-intentioned but went too far.

"If this credit crisis has taught us anything, we need to focus on paying off our debts and saving more," she said. "Using government money to help someone pay off debts is not the same as asking them to pay off their debts themselves."

Houston has three grant programs to help qualified homebuyers with down payments and closing costs. The most generous provides up to $37,500 to buy a home that costs $135,000 or less in disadvantaged neighborhoods the city is trying to revitalize.

Councilman Mike Sullivan saw this latest idea as something different.

"We just can't give away government money to help people with their credit scores," Sullivan said Monday. "You're giving them other taxpayers' money to pay off the bills."

The program's backers said it wouldn't be used on people with poor or damaged credit. Brian Stoker of Amegy Bank, one of the lenders the city uses in its affordable housing program, said potential homeowners would hear of the program only if their credit scores were "pretty close."

"For somebody who really qualifies and should have a home, it doesn't take much to help them get there," said Stoker, Amegy's community banking manager.

The city made 130 grants to homebuyers last year and hopes to increase that number to 540 this year, said Juan Chavez, manager of Houston's Homebuyers Assistance Program. Chavez said some applicants would need less than $3,000 and that eligibility requirements would be strict.

That doesn't appease anti-tax activists who warned of the harsh lessons from the housing crash and recession.

"I just don't see any way someone could justify this with everything that's gone on in the credit market," said Michael Quinn Sullivan, president of Texans for Fiscal Responsibility. "This is precisely what got us into it, with the playing fast and loose with credit scores."

(Copyright 2009 by The Associated Press. All Rights Reserved.)