U.S. Senate sends housing rescue bill to House

WASHINGTON (Reuters) - The U.S. Senate, after weeks of wrangling, completed work Friday on its plan to save hundreds of thousands of American homeowners and their families from foreclosure and sent it to the House of Representatives.

The legislation is opposed by the White House. Differences with the House, which approved a similar measure of its own, must be resolved before a final bill can be sent to President George W. Bush in the hope he will sign it into law.

On Friday night, the White House issued a statement renewing a warning that Bush will veto any final proposal if it retains a provision in the Senate bill offering block grants to states to buy foreclosed homes, which the White House contends is too generous toward lenders.

Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said he was optimistic small disagreements with the House would quickly be resolved and that Congress could finish the legislation as early as next week, especially if some language the White House dislikes is dropped.

In conversations earlier Friday with Treasury Secretary Henry Paulson, Dodd said he had "heard nothing but positive comments," bolstering his hope a bill would be enacted.

House Speaker Nancy Pelosi, a California Democrat, also was upbeat following the Senate's action, saying she thought a House-Senate deal would be reached soon. "Recent record foreclosures and continued instability in the housing market underscore the urgency of completing a comprehensive bill ... which I hope President Bush will sign," Pelosi said.

At the heart of the bill is a multibillion-dollar fund to help an estimated 400,000 financially strapped homeowners swap their shaky loans for fixed-rate, 30-year mortgages.

It would also overhaul regulation of Fannie Mae and Freddie Mac, the nation's largest mortgage finance companies, while sending federal money to states and communities to buy and renovate foreclosed properties.

On a vote of 63-5, the Senate rejected a pair of amendments that the House sent it. That cleared the way for the Senate bill to go to the House. The vote came a day after the Senate cleared the last in a series of procedural hurdles.

The Senate actually approved its bill, 79-16, shortly before its Fourth of July recess. But it was unable to transmit it to the House until dealing with a series of motions and delays that drew fire from backers who said homeowners needed help urgently.

"Every single day between 8,000 and 9,000 people file for foreclosure. In the month of June, 250,000 people moved into that category," said Dodd, a chief sponsor of the bipartisan bill.

Dodd said while a handful of Republican senators slowed down the legislation, there was a "strong desire by all of us, most of us, to get something done."

INVESTOR WORRIES

Shares of Fannie Mae and Freddie Mac dropped sharply this week as investors fret over whether the two government-sponsored enterprises have the reserves needed to survive sinking home values and soaring defaults.

The legislation was drafted to ease failing loans that have swept across the country, driving down housing prices, pushing people out of their homes and sending financial markets into a tailspin.

Bush has threatened to veto the legislation because he says it is too costly and exceedingly helpful to lenders who have been largely blamed for the problem. But he has said he wants to work with lawmakers to find common ground.

Lawmakers from both parties will likely pressure Bush to eventually back a bill during this election year when the housing crisis is weighing on voters' minds.

The bill had been delayed by Sen. John Ensign, a Nevada Republican who unsuccessfully sought to attach a package of renewable energy tax breaks to it. Sen. Jim DeMint, a South Carolina Republican, had also managed to tie it up.

"We've spent this week talking about how we're going to bail out the mortgage industry who made loans that they shouldn't have made for people buying homes that were more expensive than they could afford," DeMint said.

(Additional reporting by Patrick Rucker and Richard Cowan; Editing by Peter Cooney, Gary Hill)