Bonds News

UPDATE 2-US Senate Democrats say have deal on homebuyer credit

* Democrats agree, but key Republican not on board

* Vote in Senate expected this week

(Updates with timeline, procedural vote, background)

WASHINGTON, Oct 27 (Reuters) - U.S. Senate Democrats reached an agreement among themselves to extend the soon-to-expire $8,000 tax credit for first-time homebuyers, Senate Banking Committee Chairman Chris Dodd said on Tuesday.

“We have that. Done,” Dodd told reporters, but declined to specify the details of the agreement.

A Republican senator who has worked with Dodd on the issue cautioned that members of his party had yet to sign off on any deal, and it was unclear if or when such a measure would come up for a vote.

“We’re close, we’re close, but I can’t get into any details until it’s a done deal,” said Senator Johnny Isakson.

The popular tax credit, which has helped lift the housing market out of its worst slump since the Great Depression, is set to expire on Nov. 30.

Some backers of an extension have proposed offering it as one of a number of possible unrelated amendments in a bill to extend jobless benefits to nearly 2 million people.

But Senate Majority Leader Harry Reid has not yet decided whether to permit possible amendments.

“The question is now whether or not these other amendments that people want to bring up that have nothing to do with either of those issues would be insisted upon, if they are then we may have a hard time getting that (the tax break) included” in a final bill, Dodd said.

If Reid decides to move the jobless measure without amendments, the home buyers home credit could be attached to other legislation or be brought up as a separate bill.

Senate Democrats, by a vote of 87 to 13, cleared a Republican procedural hurdle on Tuesday so they could begin formal debate of the jobless measure.

Dodd and Isakson want to extend the homebuyers credit through June of next year and broaden it to anyone buying a primary residence, not just first-time buyers.

Reid had backed a narrower version that would extend the full credit through March and gradually phase it out through the end of 2010.

Dodd said a deal would merge the two proposals.

Democratic Senator Max Baucus, who has helped to craft the narrower version, told Reuters that he now supports several aspects of Dodd’s plan, including increasing income limits, extending the full $8,000 credit through June, and a “modest expansion” of whether it would apply to those who have bought a house before.

Baucus said he expects the Senate to act this week.

The House of Representatives is not expected to take up the issue this week but could act on its own if the Senate does not, said House Majority Leader Steny Hoyer.

The U.S. real estate and homebuilding industries are lobbying Congress to extend the tax credit although critics say it gives cash to many buyers who would have purchased a home without it. The White House has also raised concerns about the cost.

About 1.5 million tax returns filed with the Internal Revenue Service have claimed the credit, at a cost of $10 billion, since it was first approved in February 2008. (Reporting by Corbett B. Daly and Andy Sullivan; editing by Chris Wilson)