The Bush administration issued a surprise veto threat Thursday against a massive housing bill the Senate is debating.

The legislation includes a major regulatory overhaul for Fannie Mae and Freddie Mac, as well as changes to the Federal Housing Administration and a $300 billion expansion of the FHA’s insurance programs to help struggling borrowers refinance their mortgages.

“The federal government must not prolong necessary corrections in the housing market, bail out lenders, or subsidize irresponsible borrowing and lending, at the expense of hard-working people who have played by the rules,” the White House said in a statement of administration policy.

The White House reiterated its strong opposition to a provision in the bill that would provide $4 billion in community development block grants to the purchase and rehabilitation of foreclosed homes.

The White House said it strongly opposed a provision in the FHA modernization that would bar the agency from implementing a risk-based pricing structure for insuring riskier loans.

The administration also objected to a provision in the bill that would funnel money from Fannie Mae and Freddie Mac to cover the costs of the expanded FHA insurance program.

While the measure enjoys bipartisan support, including an endorsement from the Banking Committee’s ranking Republican, Richard C. Shelby of Alabama, the veto threat could change the outlook for the legislation.

Previously, Shelby had predicted a committee-approved version of the bill, which was substantially similar to the version on the Senate floor, would not be vetoed.

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