Will FHA Bills Be Vetoed?

by Peter G. Miller
April 25th, 2008

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The rumor mill is churning in Washington, suggesting that the White House will veto two mortgage reform bills should they pass on Capitol Hill — H.R. 5818: The Neighborhood Stabilization Act of 2008 and bill=h110-5830″>H.R. 5830: The FHA Housing Stabilization and Homeownership Retention Act of 2008.

The first bill would provide $15 billion for the states to acquire foreclosed homes. This would get properties off the market, thus reducing the supply of homes for sale and hopefully reducing pressures to drop values.

The second bill is the proposal by Rep. Barney Frank (D-MA) to expand the FHA with $300 billion in additional insurance capacity. This would increase the ability of the FHA to aid those with toxic loans — but the bill carefully requires lenders to make short-sales and to give up prepayment penalties.

Rumors, whether true or false, are often useful political tools. The sense of an impending veto can cause the content of a bill to be changed without lifting a finger — thus preserving the ability to deny that there was any pressure to make changes.

In this case the foreclosure mess has gotten so far out of control that even natural opponents of government involvement are beginning to understand that something must be done. If there is a veto of either bill, the political price will be considerable — and that’s not a rumor.

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