Lawmakers reach agreement on housing bill

WASHINGTON - Two powerful senators announced Monday they had reached an agreement for a homeowner rescue package that could help a half-million strapped borrowers get government-backed mortgages.

Sen. Christopher J. Dodd, D-Conn., the Banking Committee chairman, and Sen. Richard C. Shelby of Alabama, the panel's senior Republican, said the committee will move forward with bipartisan legislation on Tuesday after completing their negotiations.

"This legislation is good news for both the markets and homeowners," Dodd said. Added Shelby: "I've long said that we should do what we can to help struggling homeowners, short of asking the taxpayer to foot the bill."

Dodd's committee was scheduled to vote last week, but the vote was canceled in hopes that the two senators could come up with a bipartisan measure to bring to the Senate floor.

A White House spokesman said President Bush did not have a position on the proposed bill yet. However, Bush said earlier Monday that he remains opposed to any homeowner rescue legislation that would be a bailout for lenders.

"Laws shouldn't bail out lenders," Bush said after getting an economic update from Treasury Secretary Henry Paulson. "Laws shouldn't help speculators. The government ought to be helping creditworthy people stay in their homes."

The compromise bill allows the Federal Housing Administration to back up to $300 billion in new loans for debt-ridden homeowners facing foreclosure, who would otherwise be considered too financially risky to get a fixed-rate, government-insured loan.

Money for the plan would be drawn from an affordable housing fund that will be funded through profits from government-sponsored mortgage giants Fannie Mae and Freddie Mac.

To qualify for the proposed FHA program, borrowers would have to show they could afford the new loans, while mortgage holders would have to agree to take a substantial loss on the existing loan in exchange for avoiding a costly foreclosure. The FHA would share at least half of any proceeds if the homeowner refinanced again or profited from selling the home.

The bill would also tighten regulations on Fannie Mae and Freddie Mac.

"It doesn't include everything we would have liked, but it is a significant step forward and ought to become law," said Sen. Charles Schumer, D-N.Y.