White House leaves door open on housing rescue
WASHINGTON (Reuters) - The White House on Friday set out terms for a possible deal on a housing market rescue plan, as a sweeping package backed by the House of Representatives was on its way to an uncertain greeting in the Senate.
The House approved a package of bills on Thursday that would let the Federal Housing Administration offer $300 billion in new guarantees to refinance the mortgages of an estimated 500,000 distressed borrowers.
The Bush administration, which has threatened to veto the legislation, said taxpayers should not have to pay for the new lending program, which the Congressional Budget Office estimates would cost taxpayers up to $2.7 billion.
"The FHA should be self-financing and not provide a subsidy from taxpayers. Taxpayers shouldn't be taking on the risk of foreclosure, and that means that underwriting standards should be sound," said White House spokesman Tony Fratto.
The House package also proposed new tax credits for homeowners and billions of dollars in loans and grants intended to help stabilize the slumping housing market.
The Senate Banking Committee had been expected to take up housing legislation on Tuesday. An aide said that was no longer scheduled, but the committee was aiming for action next week.
"It's not clear what the Senate intends to do on housing," Fratto said.
The Bush administration favors two parts of the House plan, he said: overhauling regulation of housing finance giants Fannie Mae (FNM.N) and Freddie Mac (FRE.N), and raising the limit on the size of mortgages that the FHA can insure.
"Those are our priorities," Fratto said. "If there's additional housing legislation, it should meet the president's principles of not using tax dollars to bail out lenders and speculators."
Some analysts have questioned the plan drawn up by Rep. Barney Frank, chairman of the House Financial Services Committee and a Massachusetts Democrat.
Funding appears uncertain, as does the level of participation it could win from lenders, who would have to forgive portions of loans to participate.
Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, has an FHA expansion plan targeting up to $400 billion in new guarantees and other measures.
But in the closely divided Senate, the outlook for any housing package will depend greatly on the views of Republicans, and particularly of Alabama Sen. Richard Shelby, the senior Republican on the banking committee.
"There is momentum on the side of getting something done" in the Senate, said Brian Gardner, a Washington analyst with the investment firm of Keefe Bruyette & Woods.
But, he said, "It's hard to handicap what Shelby is going to do. That's the key --- Shelby."
In a related matter, the FHA said it is expanding its FHA Secure program, an initiative launched last year by the Bush administration to help troubled mortgage borrowers.
Targeting primarily those struggling with high-cost subprime adjustable-rate mortgages, the agency said it will offer FHA-guaranteed refinancing to more borrowers by charging them higher premiums based on their risk profile.
The modified FHA Secure program "will help homeowners who can no longer afford their mortgages and missed up to three monthly mortgage payments over the past 12 months," FHA said.
As an alternative to foreclosure, borrowers can refinance with FHA and lenders can voluntarily write down the outstanding subprime mortgage principal balances, it said.
(Editing by Jonathan Oatis)
