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Veto Threat for Senate Foreclosure Bill

The White House said on Tuesday that advisers to President George W. Bush would recommend that he veto a Senate bill aimed at preventing home foreclosures stemming from the subprime mortgage crisis.

If the bill "were presented to the president, his senior advisors would recommend he veto the bill," said a statement from the Bush administration.

With a housing market slump threatening to tip the economy into recession, the Senate was expected to debate a bill this week that would let bankruptcy judges erase some mortgage debt and provide more money for fixing abandoned properties.

Democrats drafted the bill amid election-year concerns about falling home prices and a surge in home foreclosures.

The Bush administration said it opposes the bill's provision to spend $4 billion helping state and local governments redevelop abandoned and foreclosed homes. The proposal would be "extremely costly" and "a bailout for lenders and speculators, while doing little to help struggling homeowners," the White House said.

The administration also said it opposed "providing bankruptcy judges with power to modify the terms of mortgages for debtors in bankruptcy proceedings."

It said such a change to the bankruptcy code "would undermine existing contracts, leading to contraction in mortgage credit availability and affordability."

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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