Could a dysfunctional Congress totally blow its only opportunity to help thousands of home owners avoid foreclosure?

You'd think not -- after all, it's an election year and we're in the deepest real estate and mortgage slump in decades.

But last week Republicans and Democrats on Capitol Hill -- pushed along by the Bush administration -- began a high-stakes game of political chicken that could cause the long-awaited federal housing relief bill to stall and go nowhere.

The Senate passed its version of the legislation July 11, sending the bill to the House to work out differences. Then the Bush administration proposed a vast bailout contingency plan for Fannie Mae and Freddie Mac, and demanded it be attached to the housing bill.

House Democrats said: OK, if you want us to do that, then you've got to let us keep a $4 billion grant program in the bill for local governments to buy up foreclosed houses in central city neighborhoods. President Bush had previously said he would veto any legislation with such a provision.

Some Senate Republicans meanwhile are promising that they will use every parliamentary tool at their disposal to kill the proposed Fannie-Freddie bailout and the grant program to boot.

In other words, even if the House approves some revised version of the bill later this week, enemies are waiting in the Senate to delay it -- perhaps even pushing it past the scheduled summer recess into September.

Now, it's possible that saner heads will prevail later this week or next. Maybe a compromise can be worked out. But for tens of thousands home owners who are slipping toward foreclosure, eleventh-hour games of political chicken on Capitol Hill are the last thing they want to hear about.

More to the point: It's not just foreclosure relief for up to 400,000 households that's at stake here. The legislation also modernizes the FHA mortgage program, creates a temporary new tax credit designed to stimulate home sales to first-time buyers, raises mortgage limits in high-cost areas, overhauls federal regulation of Fannie Mae and Freddie Mac, and authorizes a major new system to ensure that loan originators are professionally competent and licensed nationwide.

There's a lot at stake here. All we need is the political leadership -- which has been in seriously short supply lately -- to make it happen.

Published: July 21, 2008

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consumer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.