Senate leaders have housing rescue bill deal

By Patrick Rucker and Kevin Drawbaugh

WASHINGTON (Reuters) - U.S. Senate leaders have agreed to a bipartisan bill to establish a $300 billion rescue fund for troubled mortgages and a new regulator for Fannie Mae and Freddie Mac, lawmakers said on Tuesday.

The legislation was expected to be considered by the full Senate within days, with lawmakers keen to deliver a final bill to President George W. Bush by July 4.

Rep. Barney Frank, chairman of the House of Representatives Financial Services Committee, in an interview with Reuters called the Senate bill "good progress."

But the Massachusetts Democrat said, "It's not yet where we should be. ... To the extent that people say the House will just accept the Senate bill, that's not appropriate."

The House has already passed a housing bill, which differs from the Senate's in a few respects. A final bill to be sent to Bush would have to be a House-Senate compromise.

Frank said it was still possible Congress could deliver a final measure to the White House by July 4. "The table is now set for serious House-Senate discussions about this," he said.

The Senate legislation agreed to by Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, and Alabama Sen. Richard Shelby, the committee's top Republican, represents the boldest step yet from Congress to try to stem the hundreds of thousands of foreclosures sweeping across the country amid the bursting of the real estate bubble.

"We're going to move to this. It's important that we do it as soon as we can," said Senate Majority Leader Harry Reid.

NEW FUND, NEW REGULATOR

The Senate bill would create a new mortgage insurance fund under the Federal Housing Administration to underwrite up to $300 billion of failing loans, although analysts expect it would cover a much smaller share of homeowner debt.

It would create a new regulator for home finance providers Fannie Mae and Freddie Mac, and set some new business practices for the two government-sponsored enterprises.

Language endorsed by the Senate leadership would increase the size of loans that Fannie Mae and Freddie Mac could buy by more than $200,000, pushing the cap to $625,000 in some costly housing markets, sources familiar with the bill said.

The bill would let Fannie Mae and Freddie Mac hold those larger loans in their investment portfolios, and set the higher loan size for mortgages financed by the FHA, sources said.

Disclosures given to prospective mortgage borrowers would be improved under the Senate bill, while a national licensing system would be set up for mortgage brokers.

In a measure that Republicans have criticized, federal grants would be issued to local governments or other housing groups for buying and renovating foreclosed properties.