President Bush angered House Republican leaders Wednesday by endorsing a sweeping Democratic bill aimed at easing the nationwide housing crisis, paving the way for hundreds of thousands of homeowners trapped in subprime loans they can’t afford a chance to refinance at lower rates.
Despite Republican concerns, Mr. Bush lifted a veto threat after Democrats agreed to an administration request to allow the Treasury Department the option of extending a line of credit to Fannie Mae and Freddie Mac - government-sponsored companies that finance mortgages.
Hours later the House passed the measure by a vote of 272-152. The legislation now goes back to the Senate, which is expected to pass it in the coming days. The Senate easily passed a similar version two weeks ago.
“The bill we debate today isn’t simply about helping hundreds of thousands of Americans keep their homes, as vital as that is, it is about stabilizing an entire economy,” said House Majority Leader Steny H. Hoyer, Maryland Democrat.
Treasury Secretary Henry M. Paulson Jr. said Wednesday the measure would serve as an important confidence booster to financial markets, which have slashed the value of Fannie Mae and Freddie Mac stocks in recent weeks over worries about how they will cope with billions of dollars of losses on mortgage loans.
“This is a very important message that we are sending to investors around the world,” he said.
House Minority Leader John A. Boehner said he was “deeply disappointed” with Mr. Bush’s decision to sign the bill, which he called a “bailout.”
“We must take responsible steps to ensure our financial and housing markets are sound, but the Democrats’ bill represents a multi-billion-dollar bailout for scam artists and speculative lenders at the expense of American taxpayers,” the Ohio Republican said. “This is a dangerous approach and it undermines the American dream of owning a home.”
The bill would let subprime mortgage holders struggling to make their payments refinance at lower rates backed by the government. It also would allow lenders who agree to take a substantial loss on the mortgages to reclaim at least some money and avoid a costly foreclosure.
Democrats who drafted the bill say it could help at least 400,000 families keep their homes.
The package also calls for the establishment of an independent regulator to oversee Fannie Mae and Freddie Mac, and an overhaul of the Federal Housing Administration.
The measure would allow the Treasury Department to extend to Fannie Mae and Freddie Mac a line of credit and buy their stock for 18 months if necessary to bolster investor confidence in the two mortgage giants. Fannie and Freddie either guarantee or own more than $5 trillion in mortgages - almost half the nation’s total.
The measure also would provide first-time home buyers with $7,500 in tax credits.
The Bush administration initially objected to a $3.9 billion provision to give grants to local governments to buy and refurbish foreclosed properties. But on Wednesday the White House said it dropped its veto threat because the proposed reforms to Fannie Mae and Freddie Mac “are too important to the stability of our nation’s housing market, financial system and the broader economy not to be enacted immediately.”
White House spokeswoman Dana Perino said the president is eager to sign the bill before Congress’ upcoming five-week recess.