President Bush declared Wednesday that he would veto the foreclosure relief legislation under consideration in Congress, surprising Democrats who believed that they had administration support for key portions of the bills.
In brief remarks after meeting with congressional Republicans, Bush issued his veto threat, complaining that the legislation would "reward speculators and lenders."
"I will veto the bill that's moving through the House today if it makes it to my desk, and I urge members on both sides of the aisle to focus on a good piece of legislation that is being sponsored by Republican members," Bush said.
Democrats said the package of legislation to provide federal support for foreclosure prevention and to speed mortgage refinancing had been drafted largely in consultation with the Bush administration.
Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee, said that the veto threat was unexpected and that he had believed the bill had "guarded support" from the president. Dodd noted that Federal Reserve Chairman Ben S. Bernanke this week expressed support for the core notion of the legislation.
For the president "to say he is going to veto a bill that isn't even developed over here -- I don't know who he's listening to," Dodd said.
Dodd's committee is scheduled to deliberate on the legislation next week. Two bills that had already passed the House Financial Services Committee were scheduled for a vote on the House floor Wednesday.
The main bill would allow the Federal Housing Administration to guarantee $300 billion in refinanced mortgages for borrowers unable to make payments on mortgages that are greater than the current value of their home. To take advantage of the help, borrowers would have to meet strict financial criteria and their lenders would have to agree to rewrite the mortgage principal below the home's current appraised value.
A separate bill would provide $15 billion to local governments in blighted areas that sought to purchase foreclosed homes and fix them up for resale. The president had previously said he would veto that measure, saying it would help banks more than homeowners.
Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, said, "the notion that this helps lenders is bizarre."
"Properties that are foreclosed used to pay taxes. Now they absorb them," Frank said.
He said it was hypocritical for the administration to complain about providing $15 billion in assistance to elected local governments when the Federal Reserve provided twice as much -- nearly $30 billion -- to help prevent the collapse of investment house Bear Stearns Cos.
The brokerage was pushed to the brink of collapse when its mortgage-backed securities lost value, prompting the Fed to help underwrite their purchase by another investment house.
Consideration of the housing legislation was delayed significantly Wednesday by procedural delays on the part of Republican lawmakers, who were angry that they were not being given adequate opportunity to amend a number of bills, primarily funding for the Iraq war.