Bush to Revive Push For Housing Remedy

Shoring up public sentiment on the economy -- especially the battered housing sector -- could be vital to staving off a recession as Mr. Bush enters his last year in office. Pollsters say many people who aren't directly affected by rising defaults on subprime-mortgage loans are feeling the effects anyway, as they see the values of their homes drift downward. Even if Mr. Bush fails to get much more action out of lawmakers, White House pressure could help Republicans' political fortunes by reinforcing negative public perceptions of inaction in the Democratic-led Congress.
The administration and the Federal Reserve have taken several steps to attempt to address credit-market problems caused by rising mortgage defaults, including an administration-brokered industry effort to help people avoid foreclosure.
Mr. Gillespie and other aides didn't offer new specifics for how Congress could address the housing problems. There are at least two significant pieces of legislation that Congress left unfinished last year. One would bring relief to more low-income borrowers, allowing them to refinance adjustable-rate mortgages through the Federal Housing Administration. A second initiative could help ease a credit crunch for many middle- and upper-middle-income borrowers, in part by allowing government-sponsored mortgage companies such as Fannie Mae to securitize more large loans. Currently, those companies can't take on loans with values of more than $417,000. The administration supports a temporary increase in that limit but only in connection with comprehensive reform of the agencies' oversight, including a strong regulator with authority to limit the size of the mortgage portfolios they hold.
A third possible element in a housing initiative would give states authority to issue more tax-exempt bonds to help troubled homeowners refinance their homes.
Last month, the White House announced a voluntary initiative that encourages mortgage-servicing companies to freeze interest rates for people with adjustable-rate mortgages who are running into problems as their rates rise. As many as 1.2 million homeowners with subprime loans, or those to borrowers with poor credit, theoretically could get either rate freezes or expedited refinancing.
But some observers expect the actual impact of that program to be more limited. Meanwhile, estimates of the overall number of homeowners who might go into default has risen to three million. That is creating a need for further help from state and local governments.
"Changing the tax code can also help state and local government do their part to help homeowners," Mr. Bush said in December. "This temporary measure would make it easier for state housing authorities to help troubled borrowers -- and Congress should approve it quickly."
"If Treasury is looking for something to put pressure on Congress, [enabling states to issue more tax-exempt bonds] is something they can point to," said Steve O'Connor, senior vice president of the Mortgage Bankers Association.
Mr. Gillespie suggested that Mr. Bush also will make a push for energy-policy changes, despite last month's signing of an energy bill. A possible focus this time is opening controversial new supply sources such as the Arctic National Wildlife Refuge and the outer continental shelf. Mr. Gillespie also mentioned pending trade agreements, renewal of Mr. Bush's intelligence-gathering authority, and renewal of the No Child Left Behind education initiative as top legislative priorities for 2008. The White House and Treasury also have been weighing various plans for boosting the overall economy, not just the housing sector, possibly through additional tax cuts...more