Housing Package Set For House Approval; Bush Drops Veto Threat
A little fear over the possible future of Fannie Mae (FNM) and Freddie Mac (FRE) is apparently all it took to put enough momentum behind a behemoth housing package that has been bouncing throughout Congress since May -- on Wednesday morning, White House press secretary Dana Perino told reporters that President Bush would not veto the bill, likely clearing the way for passage later today by the House of Representatives. News broke late Tuesday that House and Senate lawmakers had reached a compromise on the final bill, as well. The House was set to put the measure, HR 3321, to a final vote Wednesday afternoon. The original centerpiece of the bill is a proposed $300 billion expansion to the Federal Housing Administration's endorsement authority for refinancing troubled mortgages voluntarily written down by a private lender, but the recent addition of a new authority for the U.S. Treasury to backstop the continuing operations of both housing GSEs has provided the critical impetus needed to push the package through. The Bush administration had originally balked at a $4 billion allocation to Community Block Grant Development funds, also included in the renegotiated bill, which Democrats and local housing agencies say is needed to help local authorities purchase vacant, abandoned, and foreclosed properties to help prevent neighborhood destabilization. The administration had argued that the provision amounted to a bailout for lenders, but dropped its veto threat in the face of what it now sees as urgent legislation around the GSEs. "We believe this is not the time for a prolonged veto fight but we are confident the president would prevail in one," Perino said. Senate Banking Committee chairman Christopher J. Dodd (D-CT) and ranking committee member Richard Shelby (R-AL) also suggested Tuesday that the revised bill would likely face smooth passage in the Senate as well, should it clear the House as expected. "We have been engaged in extensive and largely fruitful discussions with our counterparts in the House of Representatives, as well as Administration officials," both men said in a joint statement. "We remain optimistic about the prospects for this legislation." Skepticism remains The improved prospects for the bill shouldn't be taken to mean that everyone suddenly agrees on its measures, or that they'll even be effective -- some HW sources have wondered aloud if will be able to make an immediate difference, either. "They're banking on lenders voluntarily writing down mortgages in giving the FHA this extra authority," said one source. "It's just going to be a question of whether we can get where we need to be," he said. "And that's going to be done on a loan-by-loan basis." For his part, House Financial Services Committee Chairman Barney Frank (D-MA) has warned lenders that the bill would represent a last stop on the path towards even more restrictive legislation. "If this approach … doesn’t make much difference, I must tell you that much tougher, more intrusive regulation will be on the way," he told attendees at Mortgage Bankers Association’s Secondary Market conference in Boston back in May. Beyond the expansion of FHA's endorsement authority, House and Senate Republicans have continued to make their opposition to the Fannie and Freddie rescue authority known, although neither appears to have the votes needed to stop the train at this point -- chief among them, Kentucky Republican Senator Jim Bunning. In a press conference Tuesday, Bunning unloaded on the plan to put the Treasury directly behind the GSEs, saying it "smacked of socialism." "I don't want my free markets to be socialized," Bunning said in remarks published by the Associated Press. "I don't think it works real well, and I don't think the American people want that at all." Disclosure: The author was long FRE and held no positions in FNM when this story was written; further indirect holdings may exist, however, via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.