UPDATE 2-U.S. senators say have deal on housing rescue bill
(Adds background, Dodd remarks, detail)
By Patrick Rucker
WASHINGTON, May 19 (Reuters) - Leaders of the U.S. Senate Banking Committee said on Monday they had reached a deal on legislation to create a multibillion dollar mortgage rescue fund and a new regulator for housing finance companies Fannie Mae (FNM.N) and Freddie Mac (FRE.N).
The plan would enable the Federal Housing Administration to guarantee billions of dollars in refinanced mortgages for homeowners whose properties have fallen in value since they took out their loan.
"The bill addresses the root of our current economic problems -- the foreclosure crisis -- by creating a voluntary initiative at no estimated cost to taxpayers which will help Americans keep their homes," Democratic Sen. Christopher Dodd, the committee's chairman, said in a statement.
The U.S. House of Representatives approved a similar bill earlier this month that the nonpartisan Congressional Budget Office said would leave taxpayers on the hook for $1.7 billion worth of failed loans.
The bill that is expected to clear the Senate Banking Committee on Tuesday is a significantly more modest initiative that would only cost $500 million Under the Senate legislation, Fannie Mae and Freddie Mac would cover the expense of the program, unlike the House bill.
"This is a victory for the taxpayers. As far as the housing component is concerned, we're not funding this ... with taxpayers' money," Alabama Sen. Richard Shelby, the panel's top Republican, said on CNBC.
Importantly, Dodd, of Connecticut, said the new regulator envisioned for Fannie Mae and Freddie Mac would not have the authority to indefinitely control the mortgage finance companies' investments or their capital.
"It does not give this regulator the power to engage in systemic risk issues. ... Secondly, you cannot force (Fannie Mae and Freddie Mac) to raise capital for any reason whatsoever," Dodd told reporters about the bill. (Additional reporting by Alister Bull; Editing by Leslie Adler)
