White House to push housing plan despite Republican opposition

The White House has recently promised major steps to boost the housing market and help struggling homeowners, but bruising fights with Congress loom over major pieces of the plan.

The housing market is widely seen in Washington as still struggling in the wake of the subprime mortgage crisis, and weighing down what would be a more robust economic recovery.

In recent days, the White House has made a concerted effort to address the housing sector, rolling out new plans to help homeowners avoid foreclosure and boost the housing sector.

{mosads}But while the administration can nibble around the edges and implement changes, it needs Congress and regulators to get on board with any major initiatives, and this presents significant challenges.

President Obama is calling on Congress to pass legislation to establish a streamlined refinancing program that would be open to most borrowers, specifically those who don’t hold government-backed loans. The program would permit people who are current on their payments, especially those whose houses are “underwater,” to refinance their mortgages, allowing them to save up to $3,000 a year by taking advantage of lower rates.

By expanding eligibility, about 3.5 million additional borrowers can take advantage of the refinancing program, Housing Secretary Shaun Donovan said earlier this week.

The White House’s main argument is that economists recognize that a broad-scale refinancing effort “is one of the most important things that we can do not only for families and for the housing market but also for the economy more broadly.”

Here is an outline of the president plan.

However, the costs of that refinancing program — between $5 billion and $10 billion — are supposed to be covered by a new tax on the nation’s largest banks, which would need to be approved by Congress.

But with Republicans running the House, any new tax can be assumed to be dead on arrival on Capitol Hill.

House Financial Services Committee Chairman Spencer Bachus (R-Ala.), who would be charged with steering such a proposal to the House floor, dismissed Obama’s proposal as “not a serious plan to help the nation’s housing market.”

“It won’t pass Congress,” said one financial industry executive of the bank fee. “It’s deader than Julius Caesar.”

Despite the opposition, Donovan said at the White House earlier this week that “the very institutions that made many of these mortgages that caused much of the damage that we’re trying to repair ought to participate in helping to solve it, and we think the bank fee is a good source to do that.”

“If Congress believes that there are other ways that we should look at paying for this, I think we would be open to discussions — as the president has done in other situations, we are open to having a discussion with Congress about the best way to make sure the cost of this is covered,” he said.

Regardless of what Congress needs to pass, Donovan said the administration isn’t going to wait on lawmakers to move forward.

He said most of the president’s proposals — including an investigation into foreclosure and other mortgage abuses related to the housing and financial crises, transitioning foreclosed property into rental housing to help stabilize neighborhoods and boost housing prices, and implementing a new so-called homeowner “bill of rights” — can be done without lawmakers.

“Those are steps that we can take on our own,” he said.

“The steps that we’ve already taken to help Fannie Mae and Freddie Mac borrowers refinance, steps that we will take as part of this to help FHA borrowers refinance, the Homeowner Bill of Rights — and I could go on — all of these are steps that we can take and we are taking, because we can’t wait for Congress on these.”

Fannie Mae and Freddie Mac have moved forward with helping unemployed homeowners by providing 12 months of forbearance, an initiative picked up by several banks.

Meanwhile, the Consumer Financial Protection Bureau (CFPB) is working on a one-page mortgage document designed to explain the costs associated with a home loan.

While lawmakers have generally expressed support for simplifying complex financial paperwork, newly appointed director Richard Cordray will lead the charge and could further irritate Republican lawmakers bristling over his recess appointment.

Senate Majority Leader Harry Reid (D-Nev.) said Friday that legislation to improve the sluggish housing market is “high on the priority list” although the chamber hasn’t produced a bill yet.

Although lawmakers are expected to push back against a proposed bank fee, he cautioned that getting anything done on that front could be difficult unless Democrats get “a little cooperation from Republicans.”

In another attempt to help struggling homeowners, the White House announced in January it was extending and expanding its flagship program in that area. In a key change, the White House said it was increasing the incentives it offers Fannie Mae and Freddie Mac to agree to principal reductions on mortgages.

While the administration can encourage such reductions, the decision to do them ultimately rests with the Federal Housing Finance Agency (FHFA), which oversees Fannie and Freddie and is charged with protecting its books as best it can.

FHFA Acting Director Edward DeMarco responded to the White House’s move by saying the agency would consider the new incentives, but did not commit to buying in.

The tensions and competing motives over dealing with the housing market were apparent on Thursday, when Rep. Scott Garrett (R-N.J.) criticized Federal Reserve Chairman Ben Bernanke for offering his recommendations for what lawmakers could do to relieve the ailing housing market.

Earlier this month, Bernanke and the Fed sent Congress a 26-page white paper detailing steps Congress can take to help boost housing. While the Fed for months has keyed in on the housing market as a substantial drag on the recovery, laying out possible paths for Congress to take in fixing the matter is a fairly rare act for the central bank. The Fed is fiercely protective of its political independence, and typically shies away from any hot partisan fights on Capitol Hill.

Garrett told Bernanke he was “taken aback” to see the Fed offer “unsolicited” advice to Congress on what to do, adding that many of its recommendations mirrored White House priorities.

“Why would you issue a paper when we don’t ask for it?” he said.

Bernanke defended the Fed’s interest in salvaging the housing market, given the prominent role it plays in the Fed’s main mission to steer the economy.

But he quickly backed down from any suggestion he was telling Congress what to do.

“I apologize if it was misinterpreted,” he said. “Our goal was just to be helpful.”