Senators Christopher Dodd, the panel's chairman, and Richard Shelby, its top Republican, reached a deal to pay for the insurance program with proceeds from an affordable housing fund financed by Fannie Mae and Freddie Mac, Dodd said yesterday in a conference call. The government-sponsored enterprises are the biggest sources of U.S. mortgage funding.
"The primary goal is to keep people in their homes, but also to help establish a floor and a bottom'' to the housing slump, Dodd, a Connecticut Democrat, told reporters.
The proposed legislation would a create a Federal Housing Administration program to insure up to $300 billion in refinanced mortgages for struggling borrowers after loan holders reduce principal. The Banking Committee is scheduled to debate and vote on the plan today.
Lawmakers in Congress have been at odds over whether to use government funds to stem foreclosures amid the worst housing slump in a quarter century. Republicans oppose using taxpayer funds, saying they would flow to speculators and irresponsible lenders. Democrats say government spending is needed to stabilize neighborhoods and help struggling borrowers.
If approved by the full Senate, the package would be combined with a bill passed this month by the U.S. House of Representatives over a White House veto threat. Congressional analysts had estimated the House bill would cost taxpayers $1.7 billion.