Bush signs housing bill

President Bush on Wednesday signed a broad housing rescue package into law, ushering in a huge expansion of the federal government’s role in the housing market.

The legislation — which would aid strapped borrowers and mortgage giants Fannie Mae and Freddie Mac alike — represents a mixed bag for the Bush administration, which had vowed earlier to veto the bill.

{mosads}Bush approved the package without fanfare, opting against holding a signing ceremony.

The package — the product of more than a year of deal-making between key House and Senate players and the Bush administration — easily passed Congress last week.

It will achieve some long-standing White House goals, such as creating a stronger regulator for Fannie Mae and Freddie Mac and modernizing the Federal Housing Administration.

But Bush was forced to swallow his strenuous objections to other parts of the legislation after the near near-collapse of Fannie Mae and Freddie Mac earlier this month prompted the White House to ask Congress for help shoring them up.

Fannie and Freddie, private companies that provide the bulk of financing for mortgages in the U.S., have long enjoyed an implicit government guarantee on their debt.

The new legislation will make that federal backing explicit by granting the Treasury an 18-month authority to lend to the mortgage giants and purchase equity in them. The Federal Reserve, too, will have the power to consult with Fannie and Freddie’s regulator on capital levels and other matters that could affect the financial system.

Treasury Secretary Henry Paulson has said repeatedly that he hopes and intends for the line of credit never to be used. The Congressional Budget Office said that there is a better than even chance that it won’t be tapped by the mortgage giants.

However, it also said that there was a 5 percent chance that the plan could cost the federal government $100 billion.

At the heart of the legislation is a measure, authored by House Financial Services Chairman Barney Frank (D-Mass.), to refinance up to $300 billion in troubled mortgages into more stable 30-year loans backed by the government.

The bill also contains a package of tax incentives to prop up the housing market and to spur the development of additional cheap rental housing.

And the bill will provide $4 billion in block grant funds for local governments to buy foreclosed properties — a measure that had provoked several veto threats from the White House.