White House Rejects Senate Housing Bill; Next Moves Uncertain

In somewhat of a surprising move, the White House yesterday signaled its opposition to a proposed bi-partisan housing bill agreed upon last week by Senators Chris Dodd (D-CT) and Richard Shelby (R-AL), from the Senate Committee on Banking, Housing and Urban Affairs.

The so-called Foreclosure Prevention Act of 2008 proposes a $10 billion increase in tax-free, state-issued bonds to help troubled homeowners refinance, $4 billion in community development block grants to permit states to buy foreclosed properties, and an additional $100 million for housing counseling. The bill would also establish a $7,000 tax credit to buyers of foreclosed homes, and would include FHA modernization provisions designed to further increase the government lending program’s footprint in mortgage banking.

“In the end, it appears that the Senate versions of even those proposals, because of changes that they made to it, raise concerns here,” White House press secretary Dana Perino said in a press conference yesterday. “And therefore, this is not a bill that we could support.”

Perino outlined the administration’s stance to the proposal, saying that the bill “will likely do more harm than good by bailing out lenders and speculators,” and singled out both the proposed tax break for buyers and additional funding of community development block grants as problematic. Administration officials have said they want to see a housing bill that modernizes the Federal Housing Administration, as well as a more focused effort to reform oversight of both Fannie Mae and Freddie Mac.

ABC News reported that the White House’s opposition caught a prominent GOP senator by surprise:

…nobody told Senate Republican Leader Mitch McConnell the White House didn’t like the bill.

Asked by a reporter about Perino’s comments, McConnell said, “You’re telling me something I was unaware of. It was unclear that the White House had a stated position yet on this bill.”

“They wouldn’t support it,” the reporter followed up.

“Yes. Well, we’ll see how the Senate feels about it at 2:15,” McConnell said.

In the end, the Senate overwhelmingly passed a key test vote on the proposal Tuesday anyway, winning bipartisan support from 92 senators — well above the 60 needed to fast-track its consideration. But it seems clear that any passage of the bill will face rough sailing in the House, where Democrats there have signaled a desire to pull together a package that includes hotly-contested provisions regarding so-called bankruptcy cram-down legislation.

“We have serious concerns that these elements and others would do little to help homeowners avoid foreclosure or reduce housing inventories,” Perino said. “Fortunately, it doesn’t appear likely that this bill will come to the President’s desk, as the House has indicated that it plans to go its own way anyway.”

Experts that spoke with Housing Wire have said that the strong difference in opinions between House and Senate lawmakers, as well as the strong stance being taken at the White House, may provide a significant roadblock to the fast passage of any housing relief measure by Congress.