Senate clears way for housing rescue vote

By Patrick Rucker

WASHINGTON (Reuters) - The Senate moved closer on Monday to passing election-year legislation meant to save hundreds of thousands of troubled homeowners from foreclosure.

The legislation would create a government-backed mortgage insurance program with the power to refinance as much as $300 billion worth of failing home loans.

"This will be the major achievement and accomplishment of this Congress when it comes to dealing with the underlying economic crisis which is, at its heart, the foreclosure crisis," said Sen. Christopher Dodd, chairman of the Senate Banking Committee and an author of the legislation.

The Senate agreed to limit debate on Monday sending the measure toward a final vote planned for Wednesday. If the bill is ratified, it needs to be reconciled with a similar measure passed by the U.S. House of Representatives.

Independent research by the nonpartisan Congressional Budget Office found the measure would do little to ease the housing crisis.

Restrictions, administrative costs and red-tape will see the program reach only about $68 billion worth of the $300 billion worth of mortgages that it is authorized to handle, according to the CBO.

That amounts to roughly 400,000 of the 11 million borrowers who have some of the riskiest home loans and will face foreclosure between 2009 and 2011, the CBO said.

Under the Senate plan, mortgage companies would have to erase a share of a home's value before the government would be willing to take the loan off their hands.