HAI continues to follow housing legislation in Congress to address the current mortgage and foreclosure crisis gripping the nation.  House and Senate lawmakers hit the brakes this week on legislation aimed at Fannie Mae and Freddie Mac, signaling they are considering significant changes to the Bush Administration’s plan to shore up the mortgage giants.

Major housing legislation (H.R. 3221) is expected to become the vehicle for the Fannie and Freddie Bush plan, and that legislation will likely come to the House floor next week.

The Bush Administration has stressed a need for Congress to act quickly after markets abruptly lost confidence in Fannie and Freddie amid a housing slump and new concerns about the companies’ finances, which sent their share prices plummeting.  On July 13, the administration offered a plan to shore up the troubled mortgage financiers.  Under the plan, parts of which require congressional approval, the Treasury Department will increase an already-existing government line of credit to Fannie and Freddie and is asking Congress for the authority to buy an equity stake in the companies to keep them financially sound.

The plan also calls for including the Federal Reserve in a supervisory role over Fannie and Freddie, known as government-sponsored enterprises (GSEs).  The broader housing package (H.R. 3221) would also create a strong new regulator for the two GSEs, with the authority to set capital standards and limits on the companies’ portfolios.

Under the White House plan, the authority to extend credit and buy stock in the company would expire at the end of 2009.  However, the plan places no cap on how large a stake could be purchased, or how sizable a line of credit could be offered.

Although the White House proposal has taken the spotlight, the underlying housing bill (H.R. 3221) includes other landmark provisions, including an overhaul of the Federal Housing Administration, an FHA-led program to help borrowers avoid foreclosure and a $14.5 billion package of tax breaks.

Earlier this week, HAI learned a $3.9 billion package of grants for states to buy and rehabilitate foreclosed properties is back on the table.  The White House had threatened to veto the provision and the House had been expected to drop the language.  However, House lawmakers are now saying it would be a tough political sell to include help for Fannie and Freddie in the housing bill while saying Congress can’t afford to send $4 billion to the cities to buy foreclosed property.  The grants will be paid for by an offset – a delay in rules that give multinational corporations more flexibility in allocating their interest expenses.

While the housing crisis is not a helicopter issue, it is a situation with the potential to affect our members, and HAI will continue to provide coverage of this legislation.