The Clinton administration's campaign to expand the FHA mortgage insurance program is pitting two Democratic heavyweights against each other-Housing and Urban Development Secretary Andrew Cuomo and Fannie Mae chairman James A. Johnson.
Mr. Cuomo will make his case today at a Senate Appropriations subcommittee hearing on his department's budget. Missouri Republican Christopher "Kit" S. Bond will preside over the hearing.
Mr. Johnson of Fannie Mae will not be testifying, but his presence will be felt. His vigorous lobbying against the measure in recent weeks makes Mr. Cuomo's task today more uphill.
The administration wants to expand the FHA mortgage insurance program, named after the Depression-era Federal Housing Administration, to let lenders make loans of up to $227,150 through the program. That is also the loan ceiling for the government-sponsored - but shareholder-owned - mortgage investors, Fannie Mae and Freddie Mac. Currently, the FHA loan ceiling is set at 75% of the Fannie and Freddie ceiling.
Mr. Johnson opposes the increases on the grounds that the government would be encroaching on Fannie's turf. He argues the change would divert the FHA's focus from the first-time, minority, and low-income buyers it was designed to serve.
Mr. Cuomo counters that the government would be backing borrowers that the private market still does not serve and says that the higher limit would not dilute the FHA's focus on low-income borrowers.
Changes to the FHA program, which backed 9% of all mortgages last year, are always contentious. The National Association of Home Builders and National Association of Realtors-two powerful lobbying groups-support the expansion. The Mortgage Insurance Cos. of America opposes it as a threat to its members' market share.
This time, Mr. Cuomo's personal involvement was expected to smooth the way.
But then Mr. Johnson stepped up to the plate.
A member of Mr. Cuomo's staff said that supporters of the higher limit were "taken aback" by the strength of Mr. Johnson's opposition. The two have discussed the issue more than once, and the word in Washington is that in a recent conversation Mr. Johnson bluntly told Mr. Cuomo that the administration would lose.
Mr. Cuomo, 40, established his credentials as a housing advocate in the late 1980s by founding a much-emulated network of privately run homeless shelters, called Housing Enterprise for the Less Privileged, or HELP.
He came to Washington in 1992 to serve as an assistant Housing secretary. As HUD secretary, his political pedigree, close ties to Vice President Gore, ambition, and media savvy make him a genuine star in the President's cabinet. The eldest son of former New York Gov. Mario Cuomo, the Housing secretary is married to Kerry Kennedy, a daughter of Robert F. Kennedy.
Mr. Johnson, 54, is no shrinking violet either. A native Minnesotan, he managed former Vice President Walter Mondale's 1984 campaign for the presidency and is considered among the most politically astute chief executive officers in the nation.
He has burnished his reputation-and Fannie Mae's-by pushing the agency to do more business with low-income, minority, and other nontraditional homebuyers. And he has used his political skills to showcase those efforts.
Mr. Johnson's easy access and rapport with lawmakers is a formidable tool, and FHA backers are keeping track of his comings and goings on Capitol Hill. He has been observed leaving the offices of key Democratic senators on the Banking Committee, which authorizes the program, and the Appropriations Committee, which is considered the most likely vehicle for passage of the administration's proposal.
The plan would raise over $200 million in additional revenue next year-a tempting enticement for Congressional appropriators.
Still, today's hearing is only the first skirmish in a campaign likely to last until May. On Capitol Hill, supporters and opponents of the increase say the outcome is hard to call, because the two protagonists are so evenly matched. Many lawmakers are waiting as long as they can to declare their positions, for fear of alienating the powerful duo.
