Despite a worsening housing crisis across the country, Congress continues to move slowly to enact legislation intended to ease the burden for homeowners. On May 8, the House adopted comprehensive legislation (H.R. 3221) that would seek to reduce foreclosures in the face of an administration veto threat issued just days before. But Senate negotiations between the chair and ranking member of the Banking, Housing, and Urban Affairs Committee have gone on for weeks, with no deal in sight. Most members' eagerness to pass a bill to address the crisis before Memorial Day has thus far been thwarted by key GOP leaders in Congress and some in the Bush administration. While the debate in Congress drags on, the nation's housing situation continues to deteriorate. Home prices have fallen ten percent in the last year, and 20,000 more American homes enter foreclosure each week. In just the last two months, the number of homes in foreclosure has gone from one in 557 to one in just 194.

It appeared there was consensus forming around the recently-passed approach in H.R. 3221, the American Housing Rescue and Foreclosure Prevention Act drafted by House Financial Services Committee Chair Barney Frank (D-MA). The bill would provide $300 billion in mortgage refinance loan guarantees through the Federal Housing Administration (FHA), helping Americans across the country refinance their mortgages and avoid foreclosure.

Yet continuing mixed signals from the administration throughout the spring regarding H.R. 3221 have cast doubt on the bill's prospects. Housing and Urban Development Deputy Secretary Roy Bernardi wrote a letter to Frank on April 24 opposing the bill. "Americans don't want to pay for the risky financial behavior of others," Bernardi said. "And they don't want to make the federal government the lender of last resort, with the private sector dumping bad loans on FHA and the taxpayers themselves."

At the same time, Treasury Secretary Henry Paulson said the administration had already proposed a similar plan and indicated he was open to Frank's bill. "There are not huge differences," Paulson said, within days of the Bernardi letter. "We are behind the objectives. We like some parts of it better than others and we have not issued a veto threat," he told Reuters.

Speculation about the administration's position halted momentarily on May 6 when President Bush released a Statement of Administration Policy (SAP) threatening to veto H.R. 3221. The SAP argued that:

• The administration's FHASecure program "has already helped more than 180,000 borrowers refinance"
• The Frank plan's "$1.7 billion price tag would be passed on to taxpayers who are not participating in this new FHA program. This attempt to shift costs to taxpayers constitutes a bailout"
• Frank's concession to administration demands to include "GSE Reform and FHA Modernization … in H.R. 3221 is largely symbolic"
• The bill is "likely to prove ineffective. The requirements to write down a portion of the principal balance and to waive prepayment penalties by existing lenders will likely result in only the worst loans being approved by servicers to participate in the program"

Rejoinders by Frank and others have disputed each of these claims. The Congressional Budget Office estimated the Frank plan would forestall at least three times as many foreclosures as FHASecure. OMB Watch estimated the Frank foreclosure prevention plan would, at most, cost the average taxpayer $4 dollars a year. Against this backdrop is the cost of the housing crisis, which Princeton Professor Paul Krugman projects will be six to seven trillion dollars in lost home equity value.

It was not just outside analysts and experts who questioned the Bush administration's tactics, as some congressional Republicans openly doubted the sincerity of Bush's veto threat. Sen. Mel Martinez (R-FL), who served as Bush's first Secretary of Housing and Urban Development was quoted in The New York Times as being "surprised" by the White House's actions and felt the inconsistent message and late and "obtuse" threat was issued merely as a negotiating tactic. An even more telling response to the SAP came from the 39 Republican House members who joined the majority in the May 8 vote to pass the Frank bill 266-154. As one of them, Rep. Steven LaTourette (R-OH), told the Washington Post after the vote:

What's offensive is some of the rhetoric. They say it rewards speculators. No, it doesn't. It's limited to homeowners. They say it's a $300 billion bailout. No, it's not. It costs $1.7 billion. Would I have written the bill the way Chairman Frank did? No, but we're not in charge anymore ... People are expecting us to do something.

Whether Congress does anything depends largely on what Senate Banking, Housing, and Urban Affairs Committee Chair and Ranking Member, Sens. Christopher Dodd (D-CT) and Richard Shelby (R-AL), respectively, plan to do with Dodd's housing bill. That bill is modeled on H.R. 3221 but provides up to $400 billion in FHA loan guarantees. Dodd's legislation was originally included in, then dropped from, the Senate housing package adopted on April 10. Dodd recently reintroduced his original FHA loan guarantee proposal in a separate, stand-alone bill.

The final Senate package has been roundly criticized, especially for its tax provisions. The Center on Budget and Policy Priorities reported those provisions "will do little or nothing to help either homeowners or hard-hit communities and that in one case will actually worsen the problems facing local governments."

Prospects for the Dodd bill may have been complicated on May 9 when a front-page article in The New York Times broke a story detailing Shelby's real estate interests. The article noted that critics of Shelby believe his "ties to the mortgage industry and the Alabama real estate market, and the generous campaign donations he receives from financial services companies, have distorted his perspective and led him to delay critical legislative remedies" to the point where, some feel, Shelby should not be playing a leading role in drafting solutions to the housing crisis. Frank in particular feels that during the recent negotiations, Shelby has been a major obstacle to passing compromise proposals.

With a cloud over Shelby's role in negotiations with Dodd on a Senate companion piece to the Frank bill, the White House's apparent determination to veto the bill, and continued opposition to it from the GOP congressional leadership, the road ahead for the Frank bill is far from certain. But the salience of the issue and election-year imperatives may push Congress past the current obstacles to enact some kind of relief package before the year is over.