The White House today threatened to veto the House housing-stimulus bill that could pass this afternoon, although some suspect the threat is more bluster for negotiating purposes. The House is expected to pass the package, which would allow the Federal Housing Administration to help refinance up to $300 billion of troubled subprime loans. A significant number of Republicans support the bill. In anticipation of the outcome, the White House released a Statement of Administration Policy that called the bill "overly burdensome and prescriptive" and said it would veto the measure in its current form. By opening up the FHA program to more risky borrowers, the administration said, the bill would jeopardize the program's financial solvency if those loans were to default. It noted that CBO found the bill would result in a default claims rate of 35 percent, and recoveries for the failed mortgages would cover an estimated 60 percent of the outstanding loan amount. Bush held a news conference with Republicans to push for the GOP substitute, a narrower version that features a tax credit of up to $10,000 for new homebuyers. "We are committed to a good housing bill that will help folks stay in their house, as opposed to a housing bill that will reward speculators and lenders," Bush said following a White House meeting with the Republican Conference. One lobbyist who has talked with the administration said it was the price tag, not the refinancing process, that was the problem for the White House.
But the House Democratic package also includes two administration priorities: a bill to revamp the FHA's mortgage insurance program and another that would tighten oversight at government-sponsored enterprises Fannie Mae and Freddie Mac. House Financial Services Chairman Barney Frank noted the administration has sent conflicting signals, with HUD threatening to veto the bill while Treasury officials are privately telling him that they want to get an overall package completed if FHA and GSE are in the mix. Senate Banking Chairman Christopher Dodd noted some Bush appointees have vouched for a housing rescue plan. "He doesn't seem to be heeding the advice of his own former chief economist and current Fed Chairman Ben Bernanke, or his appointed bank regulators, such as the chair of the FDIC and the director of the Office of Thrift Supervision, all of whom have spoken out in favor of similar proposals," Dodd said.
The Frank package also contains $11 billion in housing tax cuts, most of which the administration opposes. Those include provisions that would allow municipal bonds guaranteed by the Federal Home Loan Bank system to be tax exempt and provide a $7,500 refundable tax credit for first-time homebuyers. "The White House isn't going to veto anything that reaches them," one housing lobbyist noted. The lobbyist added the veto threat was more about giving Republicans cover to vote against the bill and retaining some negotiating ability for an eventual conference.
The Senate passed last month its narrower package, providing $4 billion so communities could buy and rehabilitate foreclosed properties and allocating $13 billion in housing-related tax breaks. Dodd is working on moving GSE legislation as well as a FHA refinancing measure. Dodd said he wants to mark up both bills in his committee next week. The House also is scheduled to vote on another measure today that would provide $15 billion to states and cities to buy and rehabilitate foreclosed homes so they can place families back in them. The White House strongly opposes that measure, sponsored by Rep. Maxine Waters, D-Calif.
This article appears in the May 10, 2008 edition of National Journal Daily PM Update.