WASHINGTON, D.C. — U.S. Rep. Barney Frank, D-Mass., told an audience of Realtors today that it’s too early to know whether President Bush will follow through with a threatened veto of housing legislation that seeks to aid troubled borrowers and make conforming loan limit increases permanent, among other provisions.
The House, in a 266-154 vote earlier this month, passed legislation originally put forward by Frank that encompasses several pressing issues for the housing industry and economy, including tighter oversight of government-sponsored mortgage entities Fannie Mae and Freddie Mac.
In an address during a National Association of Realtors conference today, Frank said the president’s veto "is still an open question" as the bill is considered by the Senate.
"No senator should be allowed to say, ‘Oh well, he’s going to veto it — I’m not going to act," Frank said. "The Constitution says the president gets to veto the bill after we pass it, not that he gets to threaten to veto it so we can all duck a tough issue. That’s a misreading of the Constitution."
Frank also noted that the bill did have some support from Republican legislators in the House.
The presence of thousands of Realtors in Washington — part of an annual federal lobbying drive to raise awareness about issues important to the trade group — is "critical" in supporting the legislative package, Frank said.
"Our ability to respond as a people not just to the housing crisis but to the economic crisis is going to be decided in the next couple of weeks. You are important meters in everybody’s district," he said.
Frank downplayed the role that the association’s political contributions make in influencing policymakers while playing up Realtors’ power in numbers — though the Realtor association, through its political action committee, is a major contributor to federal and state candidates.
He said that Realtors have so far managed to block federally chartered banking entities from the business of real estate brokerage "not because you have more money … the banks don’t win against you because they can’t match the grassroots lobbying power," he said.
"You are present in everyone’s district, and the nature of your business is you’re out there talking to a lot of people. You have some of the same impact as taxi drivers do — (but) differently dressed."
Frank criticized attempts to paint the federal housing package — dubbed the "American Housing Rescue and Foreclosure Act" — as a bailout effort as misguided.
"We hear it described as a terrible intervention in the marketplace, bailing people out," said Frank, who is chairman of the House Financial Services Committee.
"We’re saying that the market on its own managed to screw up the financing of housing, and we don’t want to displace the market. We want to do what we can through the FHA, through Fannie Mae and Freddie Mac.
"We are responding to a crisis in financing. It was a crisis in financing that was caused not by the government but frankly because of too little government."
He noted that major provisions of the legislation call for $1.7 billion in spending to assist a group of about 500,000 troubled borrowers in avoiding foreclosure.
Based on estimates from the Congressional Budget Office it will cost about $4,800 for each avoided foreclosure, he said.
"Can you imagine turning down the chance to avert a foreclosure, with all the economic dislocation, with all the pain … for $4,800?"
No solid alternative to the legislation exists at this time, Frank said. "The alternative is: continued foreclosure. If we do not do something to reduce the rate of foreclosure, we are in an economic downturn, recession or whatever people want to call it, (that) will be longer and deeper, neighborhoods will be destabilized, and there will be serious problems."
He added, "Doing it doesn’t make everything go away, but it is the only thing that is now on the table that will reduce the chaos."
The plan doesn’t seek to halt falling home prices, though it could have the effect of slowing the rate of price decline, Frank said.
"We couldn’t, if we wanted to, control housing prices over a longer term. In my part of the country I welcome prices coming down. We’ve priced a lot of people out of the market."
He used the analogy of weight loss. "I should lose 15 pounds, but not in two days. We hope we can stabilize the rate at which (prices) hit whatever the market rate would be, because too much rapidity is destabilizing. People need time to adjust."
The financial crises highlights the importance of the housing market to the economy at large, Frank said, and actions by the Federal Reserve to assist Bear Stearns investors is an example of tough decisions that came as a result of "mistakes of irresponsible financial decisions" that have taken parts of the economy as hostage.
"Sometimes when people are taken hostage, you have to pay a ransom," he said.
NAR supports major provisions of H.R. 3221, including expansion of FHA loan programs, reform of Fannie Mae and Freddie Mac, a proposed $7,500 tax credit for first-time buyers, and a permanent increase to loan limits under FHA and the government-sponsored entities.
"NAR applauds Chairman Frank’s leadership and we hope that the Senate will move quickly to finalize a bill and send it to President Bush, regardless of his stated objections to some parts of the legislation," said NAR President Dick Gaylord, in a statement.
NAR members, in visits to Capitol Hill this week, are also seeking several changes to the Housing and Urban Development Department’s proposal to reform RESPA, a federal real estate act, and to expand the comment period for those proposed changes.
And Realtors are seeking support for a Small Business Health Options Program sponsored by a group of senators that aims to make health insurance more affordable and accessible to small businesses and self-employed workers.
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