WASHINGTON The already dim prospects for a bill to wind down taxpayer-owned mortgage financiers Fannie Mae and Freddie Mac grew darker on Tuesday, as a Senate committee postponed a vote on the legislation.
The decision reflects the difficulty the panel's leaders are having rounding up the broad backing that would be needed for the measure to be brought to a vote in the full Senate.
"There continue to be important discussions to build a larger coalition," Committee Chairman Tim Johnson said.
Johnson, a Democrat, and the panel's leading Republican, Mike Crapo, have been trying to thread a needle to win support from Democrats worried about loan availability and Republicans wary of government involvement in the market.
Six Democrats and six Republicans on the 22-member committee are prepared to back the bill, but the leaders want a broader base to pressure Senate Majority Leader Harry Reid to let the legislation come up on the Senate floor.
"The longer Congress avoids acting on mortgage finance legislation, the greater the chances the two companies survive," said Brian Gardner, senior vice president at Keefe, Bruyette & Woods Inc. "It is increasingly likely the debate ... lasts into 2017."
The bill would replace the two mortgage firms with an agency that offers a government guarantee on home loans, but one that only kicks in after private interests absorb big losses.
It aims to preserve the 30-year fixed rate loans that are at the heart of the nation's mortgage system, while protecting the taxpayers who bailed out Fannie Mae and Freddie Mac in 2008. The companies are the two biggest sources of U.S. mortgage funds.
Even if the bill cleared the panel and the Democrat-led Senate, it would still need to be reconciled with any legislation the Republican-controlled House of Representatives might produce. The most likely House measure would scale back the government's involvement much more sharply.
Many conservatives blame Fannie Mae and Freddie Mac for fostering the loose lending that sparked the financial crisis, and want to do away with government mortgage guarantees.
While there is almost no chance of a bill being enacted this year, heavy backing for the Senate legislation in the banking committee would set a marker for future negotiations.
The Obama administration mounted a strong push for passage of the bill, and has stepped up those efforts in recent weeks to defend the plan against a myriad of attacks from outside groups.
Senator Bob Corker, a Tennessee Republican who introduced similar legislation last year, said the panel had a "solid majority" but required more time to bridge existing divides. "There's going to be more discussion and we're going to see where it goes," Corker said.
Efforts to secure more votes are focusing on Democrats who worry the bill would increase borrowing costs for younger and minority homebuyers, a concern shared by housing and civil rights advocates.
If the Senate does not vote before a summer recess in July, the bill will likely die.
"While I do not relish the idea of a short delay, I am pleased that a number of senators believe with just a brief period of additional time to consider it, they will have the opportunity to productively join us," Crapo said.
Chartered by Congress to provide liquidity for loans, Fannie Mae and Freddie Mac buy mortgages from lenders and package them into securities that they sell to investors with a guarantee.
The companies ran into trouble when the housing bubble burst. They absorbed $187.5 billion in taxpayer funds but have returned to profitability and have paid the Treasury more in dividends for the government's controlling stake than they received in aid.
Some private shareholders have sued the government over bailout terms that prevent the companies from buying back the government's shares, and conservative groups want them to receive a portion of profits if the two are liquidated.
The committee's decision to postpone action lifted the companies' shares. Freddie Mac's common stock climbed more than 3.9 percent to $4.03, while Fannie Mae's gained 4.5 percent to $3.97. Preferred shares in the firms also rose.
(Reporting by Margaret Chadbourn; Editing by Chizu Nomiyama and Andrea Ricci)