White House threatens to veto housing bill

WASHINGTON (Reuters) - The Bush administration on Tuesday threatened to veto Democratic-written legislation designed to provide affordable housing for low-income families, saying it opposed the way a newly-created trust fund would be financed.

While the administration said it supports helping the poor gain housing, it "strongly opposes the establishment of an Affordable Housing Trust Fund financed by diverting Federal Housing Administration (FHA) receipts and housing-related Government Sponsored Enterprises (GSEs) revenues."

The U.S. House of Representatives is scheduled to debate the bill on Wednesday. The measure enjoys strong Democratic support and is also backed by some House Republicans.

In warning Congress of a possible veto, the White House budget office said the legislation was not needed because it overlaps with programs that are already available.

The administration also objected to using FHA receipts, saying those funds are already used to offset the cost of other programs.

Barney Frank, chairman of the House Financial Services Committee, conceived the housing fund as a way to devote non-tax revenue to new housing programs.

Under the Massachusetts Democrat's plan, the fund would get a cash infusion from a charge on government-sponsored mortgage companies Fannie Mae and Freddie Mac as well as from a new fee structure for the FHA.

In the first year of the fund, all money would be earmarked for victims of Hurricanes Katrina and Rita. But the fate of the fund is tied to legislation to reform Fannie and Freddie as well as the FHA.

While Frank has pushed a reform bill through the House, the Senate banking committee has no immediate plans to ratify that bill or take up its own version of reform.

The administration has said it supports FHA reform, but the affordable housing provision could be carved out of any final legislation.