Dems and Republicans May be Able to Strike Housing-Market Legislation Deal
Earlier today, Keith Hennessey, director of the White House National Economic Council and one of the administration's top economic advisers, stated that differences between the White House and Democrats in Congress over proposed housing-market legislation aren't "insurmountable".
The comments by Mr. Hennessey seem to leave room for an eventual deal with lawmakers, despite a White House threat Tuesday to veto a House measure that would provide government insurance for about $300 billion in troubled mortgages.
The bill's goal is to encourage lenders to reduce the principal on troubled mortgage loans in exchange for a guarantee of repayment from the Federal Housing Administration in the form of insurance on the loan. Struggling homeowners would get lower monthly payments to increase their chances of avoiding foreclosure.
Expanding FHA to help struggling homeowners is a goal the White House shares with congressional Democrats, it noted in its veto warning. The Bush administration has taken administrative steps to start doing the same thing, on a smaller scale.
The White House added the House legislation in its current form would force taxpayers to foot the bill for a significant housing "bailout" for homeowners and lenders, at an estimated cost of $1.7 billion. The credit subsidy is a "fairly significant line we're not willing to cross," Mr. Hennessey said in a meeting with reporters and editors of The Wall Street Journal.
Administration officials also object to the lack of flexibility the House bill would give to the FHA and lenders. Notably, the White House wants to give the FHA the ability to charge higher premiums for higher-risk deals -- for instance, those involving homeowners with low credit scores.
Lawmakers haven't gone along. Officials warned the Democrats' approach would send claim rates on FHA-backed loans higher, requiring appropriations subsidies and threatening the agency's solvency. Restrictions on lenders also would encourage them to put only the worst loans into the program, further driving up the cost to taxpayers, the White House said.
In an appearance with House Republicans earlier Wednesday, President Bush said, "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." He urged lawmakers to support a House Republican proposal that is more in line with White House thinking.
Source: Source: WSJ | Published on May 8, 2008
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