WASHINGTON U.S. Senate leaders have agreed to a bipartisan bill to establish a $300 billion rescue fund for troubled mortgages and a new regulator for Fannie Mae and Freddie Mac, lawmakers said on Tuesday.
The legislation was expected to be considered by the full Senate within days, with lawmakers keen to deliver a final bill to President George W. Bush by July 4.
Rep. Barney Frank, chairman of the House of Representatives Financial Services Committee, in an interview with Reuters called the Senate bill "good progress."
But the Massachusetts Democrat said, "It's not yet where we should be. ... To the extent that people say the House will just accept the Senate bill, that's not appropriate."
The House has already passed a housing bill, which differs from the Senate's in a few respects. A final bill to be sent to Bush would have to be a House-Senate compromise.
Frank said it was still possible Congress could deliver a final measure to the White House by July 4. "The table is now set for serious House-Senate discussions about this," he said.
The Senate legislation agreed to by Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, and Alabama Sen. Richard Shelby, the committee's top Republican, represents the boldest step yet from Congress to try to stem the hundreds of thousands of foreclosures sweeping across the country amid the bursting of the real estate bubble.
"We're going to move to this. It's important that we do it as soon as we can," said Senate Majority Leader Harry Reid.
NEW FUND, NEW REGULATOR
The Senate bill would create a new mortgage insurance fund under the Federal Housing Administration to underwrite up to $300 billion of failing loans, although analysts expect it would cover a much smaller share of homeowner debt.
It would create a new regulator for home finance providers Fannie Mae and Freddie Mac, and set some new business practices for the two government-sponsored enterprises.
Language endorsed by the Senate leadership would increase the size of loans that Fannie Mae and Freddie Mac could buy by more than $200,000, pushing the cap to $625,000 in some costly housing markets, sources familiar with the bill said.
The bill would let Fannie Mae and Freddie Mac hold those larger loans in their investment portfolios, and set the higher loan size for mortgages financed by the FHA, sources said.
Disclosures given to prospective mortgage borrowers would be improved under the Senate bill, while a national licensing system would be set up for mortgage brokers.
In a measure that Republicans have criticized, federal grants would be issued to local governments or other housing groups for buying and renovating foreclosed properties.
Both the Senate plan and legislation passed by the House would open the mortgage insurance fund only to lenders that agreed to erase a large share of the original loan amount.
Tax measures included in the bill would include a tax credit for the purchase of a home; an increased cap on the issuance of mortgage revenue bonds; and reforms to encourage more investment in low-income housing development.
The House bill backed by Frank differs by making the FHA refinancing fund last longer, by setting higher loan limits for FHA, Fannie Mae and Freddie Mac and on some tax provisions.
DODD DEFENDS OWN LOANS
As lawmakers tried to push the housing package forward, Dodd was forced to spend part of Tuesday answering questions from reporters about his personal mortgage finances.
At a news conference, Dodd said he did not think he was getting a special deal when told in 2003 that he had been placed in a VIP program while refinancing two home mortgages with Countrywide Financial Corp. The senator said he thought the VIP status was a "courtesy" extended by the mortgage lender to him and his wife because they had been doing business with Countrywide since 1999.
"At no point did anyone ever suggest to me that we were going to get some deal out of Countrywide," Dodd said.
Conde Nast's Portfolio.com website last week reported Dodd was placed in a VIP program that could save $75,000 over the life of the loans he obtained from Countrywide.
Dodd said, "To the best of my knowledge ... the rates that we received were not some cut-rate deals at all, but were rather standard rates that you negotiate."
Countrywide, the largest U.S. mortgage lender, has been the subject of numerous lawsuits and regulatory probes into its lending practices. The company, which has agreed to be acquired by Bank of America, has suffered steep losses related to risky subprime mortgages.
The senator also said he was not acquainted with Angelo Mozilo, the high-flying founder of Countrywide who is under a federal regulatory probe into his stock sales.
"I don't know the man," Dodd said. "I may have met him at a reception or something. ... I've never talked to him about my mortgages and I never would."
(Reporting by Patrick Rucker and Kevin Drawbaugh; Additional reporting by Lynn Adler; Editing by Leslie Adler)