WASHINGTON - House members yesterday passed two housing bills authorizing $10 billion in new mortgage bonds that would not be subject to the alternative minimum tax, along with other tax-exempt bond provisions, with the intention that the bills will advance to a conference with a single Senate package passed last month.
The bond provisions of the second bill were passed by a vote of 322 to 94.
However, President Bush came out in opposition to the second, larger bill, HR 3221, the Foreclosure Prevention Act of 2008 earlier this week. Threatening a veto, he said the bill is "overly burdensome and prescriptive" and contains many provisions that would be ineffective.
A specific bond provision opposed by the administration would permit Federal Home Loan Banks to issue letters of credit for all tax-exempt bonds. Currently, FHLBs can only guarantee tax-exempt housing bonds.
"This bill would expand the mission and potential liabilities of the FHLBs by permitting them to provide guarantees of other bonds issued by state and local governments," the Bush administration stated about the package. "It would be ill-conceived to empower the FHLBs to venture far afield of their current mission by underwriting the credit risks of non-housing, public infrastructure projects."
The bill is a combination of two passed last month by the House committees on Financial Services and Ways and Means, both sponsored by their respective chairmen. Financial Services Chairman Rep. Barney Frank, D-Mass., sponsored the FHA Modernization Act, which would relax restrictions on the Federal Housing Administration to allow it to buy riskier subprime mortgages. The Foreclosure Prevention bill, sponsored by Ways and Means Chairman Rep. Charles Rangel, D-N.Y., contains several bond provisions.
In addition to the FHLB provision, Rangel's bill, like the Senate's housing package, would temporarily increase by $10 billion the amount of tax-exempt mortgage revenue bond capacity available to state and local housing finance agencies under the private-activity bond cap. The bonds could be used, not only to finance loans for first-time homeowners, but also to refinance subprime mortgages and to help finance rental housing developments. The $10 billion would become available in 2008, and would have to be used by the end of 2010.
Both bills also would exempt interest on mortgage revenue bonds from the alternative minimum tax to make them more attractive to investors. But while the Senate exemption would only apply to bonds issued under the cap expansion, Rangel's bill would permanently relieve MRBs from the AMT, a move that has had strong backing from affordable housing advocates.
Meanwhile, House members easily passed a second housing bill earlier yesterday, which provides $15 billion of federal loans and grants to state and local governments to purchase and rehabilitate owner-vacated, foreclosed homes.
By a vote of 239 to 188, lawmakers approved the Neighborhood Stabilization Act of 2008, which is sponsored by Rep. Maxine Waters, D-Calif.
The bill is comparable to the provision in the Senate housing bill that would provide $4 billion of community development block grants for the same purpose. Housing advocates expected that Waters' bill would be combined with the larger housing bill when in conference with the Senate package.
The Bush administration has also come out against both this bill and the Senate provision, calling them "extremely costly" and a "bailout" for lenders and speculators.