Senate housing action less certain: Bush aide

WASHINGTON (Reuters) - After months of debate, the chances for final congressional action on a sweeping housing rescue bill look less certain as bipartisan agreement eludes lawmakers, a White House economic adviser said on Tuesday.

The Senate Banking Committee is set to vote on Thursday on legislation to create a federal backstop for failing mortgages and a new regulator for Fannie Mae and Freddie Mac, the financing giants central to the housing market.

But efforts to forge a compromise between Democrats and Republicans on the panel have so far failed, and the committee vote is expected to largely fall on party lines.

That could be enough to move the Democratic bill to the floor, but it may stall there without a clear 60-vote majority of support needed to overcome Senate procedural obstacles routinely mounted by the Republican minority.

"Senate action is now much less certain, based on the appearance of what looks like (Thursday's) mark-up (of the bill) is going to be," Keith Hennessey, deputy director of the National Economic Council, told Reuters.

Alabama Sen. Richard Shelby, top Republican on the banking panel, has expressed little optimism of reaching agreement with Democrats before the committee working session.

"Will we reach an agreement between now and Thursday? I'm not sure," he told Reuters in an interview on Monday.

In an interview on Tuesday, Bush administration adviser Hennessey said the White House and Shelby were both determined that any new regulator for Fannie Mae and Freddie Mac would give the two mortgage finance companies strong oversight.

"We want a strong regulator, and Senator Shelby has been in the lead to make those points," Hennessey said.

BROAD HOUSING PLAN THREATENED

Partisan wrangling in the Senate, plus White House opposition, threaten to derail congressional Democrats' drive to produce a rescue plan for the ailing housing market.

With home prices falling and two million foreclosures expected this year, the House of Representatives on Thursday approved a bill to create a $300 billion mortgage-insurance fund. The legislation passed by a 266 to 155 vote, with backing from 39 Republicans, many from states hit hard by the slump.

The White House threatened to veto the House bill.

Hennessey said debate over any compromise would be shaped, in part, by conditions in the home market.

"The housing debate looks a bit different today than it did a month ago, which is very different than it was three months ago, which is very different than it was six months ago," he said. "The housing debate has been evolving over the past several quarters and I imagine it will continue to evolve."

Congressional Democrats have tried to sweeten housing legislation by including two provisions long sought by the White House. One would retool the Federal Housing Administration, the government's largest homebuyer-aid program, and the other would create a new regulator for Fannie Mae and Freddie Mac, which hold government charters to nurture the housing market and are known as GSEs.

"FHA reform and GSE reform are things that Congress has been working on for well over a year," Hennessey said, noting that Bush has prodded lawmakers to pass those measures.

As lawmakers turn their attention to November elections that will pick a new president, elect House members and a third of the Senate, time for legislative compromise is waning.

Hennessey said he could not predict whether any breakthrough was possible on housing legislation, but said the White House was not set for any big change of policy.

"We'll continue to push for our priorities and we'll see if something comes from that. But there are some things you feel like you can predict. This is not one of them," he said.

(Reporting by Patrick Rucker and Kevin Drawbaugh; Editing by Diane Craft)