White House May Veto Foreclosure Bill

Posted on May 28th, 2008 by saman

The House has started debating a housing program that would allow the government to secure loans for homeowners in danger of foreclosure. Many republicans oppose this and a veto by the white house may be at hand.

The essential part of this program centers on the Federal Housing Administration. The FHA would insure about three hundred billion dollars in loans in the next couple of years if banks will bring down the principal on mortgages.

To qualify for the program, a homeowner will need to slash debt by eighty five percent of the value of the home. If a homeowner defaulted then the FHA would be able to give the bank or lender the rest of the principal that is owed.

Over one million home loans will be eligible for the program but the budget office in congress estimates that the program would insure about five hundred thousand homeowners and it may cost over two billion dollars over the next five years. One billion dollars of that amount would have to be paid by the taxpayers.

The housing program is expected to pass the House with the assistance of some Republican congressmen who represent the states that have been hit very hard by the housing problem.

The housing bill has elements in it that are intended to attract Republican support and the White House. Both the White House and Republicans are concerned about the rescue plan because they believe that the program could add up to a bail out of borrowers, lenders and investors.

The parts of the bill that are supposed to garner Republican support are the parts that call for a closer oversight of Freddie Mac and Fannie Mae. These two organizations are sponsored by the government and guarantee the selling and purchasing of mortgages in the market.

However the administration says that these provisions are mostly symbolic. The administration believes that the foreclosure plan would cause taxpayers and the FHA to take on too much risk and that could cause financial problems for the FHA.

Critics say that it is unfortunate that President Bush has ignored sound advice from the Federal Reserve and choose the ideology of the right wing over having compassion and the need for good economics.

Members of the administration have stated that for homeowners that meet particular ratios dealing with debt and income and that have mortgages that are higher than the value of the home. Their best plan of action that would help them is to have banks and lenders make modification of loans. This could be combined with refinancing by the FHA or some other lender.

It is not clear what the threatened veto will mean for officials in the Senate and House completing the housing assistance package and taking it to the desk of the president. Congressmen see this is more about having more of a say in the final development of the bill than about simply vetoing the measure. If the Republican kills the bill this would reflect negatively the Republicans who are in need of a win in Florida or Ohio if they want to retain possession of the White House as November draws closer.