CQ TODAY ONLINE NEWS
Updated May 20, 2008 – 1:09 p.m.
House-Senate Disputes Still Hang Over Housing Package
By Benton Ives, CQ Staff
As a sweeping housing measure was approved by a Senate committee Tuesday, key House and Senate lawmakers were already preparing to continue negotiations over a provision that divides the two chambers.
At issue is a compromise included in the Senate version of the housing package that would divert some money from an affordable housing trust tied to mortgage finance giants Fannie Mae and Freddie Mac to pay for a new program aimed at helping struggling borrowers.
House Financial Services Chairman Barney Frank , D-Mass., said Tuesday morning that “a fight is brewing on the affordable housing trust fund,” which he fought to create. Still, Frank said he had not reviewed the Senate language in detail, and suggested there was room for negotiation.
The Senate Banking, Housing and Urban Affairs Committee approved its compromise legislation Tuesday by 19-2. Michael B. Enzi , R-Wyo., and Jim Bunning , R-Ky., cast the only “no” votes.
Panel Chairman Christopher J. Dodd , D-Conn., called the measure “a major step forward,” though he noted that “we’ve got a ways to go yet. We all know that.”
Dodd said he expected the measure to reach the Senate floor sometime after the Memorial Day recess. He said he hoped to have a final housing package delivered to the president by July 4th — echoing predictions from Frank — that could include a package of housing-focused tax breaks and a modernization of the FHA, in addition to the provisions approved by his committee Tuesday.
The Senate compromise would create an affordable housing trust fund using revenues from Fannie and Freddie, but would divert some of that money initially to pay for a $300 billion expansion of the Federal Housing Administration’s insurance program. The expanded authority is designed to allow the FHA to help homeowners avoid foreclosure as they struggle to keep up payments on mortgages that now exceed the value of their homes in many cases.
The legislation would authorize the FHA to insure refinanced mortgages after lenders agree to accept a writedown to reflect today’s lower market values and to offer borrowers terms they can afford. The White House, along with the panel’s ranking Republican, Richard C. Shelby of Alabama, said taxpayers shouldn’t have to shoulder the costs of backing the refinanced loans, arguing that the new program could amount to a bailout for lenders and reckless borrowers.
After the vote on Tuesday, Shelby said “I don’t believe the president will veto this – I hope not - there’s no taxpayer money involved here.”
The Bush administration threatened to veto a House-passed measure (
As in the House measure, the Senate program would be voluntary. It would require that the new loan amount be no more than 90 percent of the home’s appraised value, and the new loan would have to provide a 30-year fixed-rate mortgage.
It also would require the homeowner to share any appreciation under the new loan with the government if the home is sold.
Both the House and Senate measures also include a regulatory overhaul of Fannie and Freddie and would put a new federal regulator over the two mortgage companies. The White House and many congressional Republicans have long pushed for that step.
House-Senate Disputes Still Hang Over Housing Package
The new regulator would have the authority to set limits on the company’s massive portfolios, based on a safety and soundness standard. The regulator would likewise be able to set minimum capital levels beyond current requirements, based on a safety and soundness standard.
Language included in a manager’s amendment to the Senate bill also required that those holdings be backed by “sufficient capital,” potentially broadening the regulator’s authority to set capital requirements.
Frank said the Senate’s decision to divert some revenues from the affordable housing trust fund to underwrite the FHA refinancing program could be “one of the most contentious issues.”
Still, Frank said the Senate agreement augured well for the legislation’s long-term prospects and reduced the chances of a White House veto.
“I don’t think the Senate would have gone through all this work if they had expected a veto,” Frank said.
Frank agreed with Dodd that a bill could be on the president’s desk by July 4th. “It’s political will, not time,” Frank said. “I feel strongly about the affordable housing trust fund . . . but there’s a great deal of agreement on this.”
Affordable Housing Fund
Sheila Crowley, president of the National Low Income Housing Coalition, hailed creation of an affordable housing trust fund for the production, preservation and repair of low-cost housing, a longtime objective of her organization and other advocates for the poor.
“We are very pleased that at long last a bipartisan bill has come out of committee in the Senate that creates a national housing trust fund with dedicated funds to build and preserve rental homes for low-wage workers and elderly and disabled people on fixed incomes,” she said.
Crowley and others had expressed concern last week that too much funding would be diverted from the new trust fund for the FHA expansion. But she said the impact was less than initially feared.
The measure would divert up to 100 percent of the Fannie Mae-Freddie Mac affordable housing assessment to the FHA refinancing program in the first year after enactment.
That would drop to 50 percent in year two and 25 percent in year three. Any excess assessments beyond the funds needed for the FHA program would go to the affordable housing fund.
“We will continue to work to direct more revenue to the housing trust fund, needed to accomplish our goal of building and preserving 1.5 million homes,” Crowley said.
First posted May 20, 2008 10:41 a.m.
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