Dodd, Shelby Agree on $300 Billion Mortgage-Insurance Measure
U.S. Senate Banking Committee leaders moved closer to passing housing legislation that would stem foreclosures by insuring as much as $300 billion in mortgages and create a new regulator for Fannie Mae and Freddie Mac.
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 during the call.
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 first cash advance.
`Creative Solution'
“It's a pretty creative solution to the administration's objections to using taxpayer money to what they perceive to be a bailout,'' Gilbert Schwartz, a former Federal Reserve attorney and a partner at Washington law firm Schwartz & Ballen LLP, said yesterday. “If you use Fannie and Freddie's money, that resolves that issue and it seems to me that the administration should not object to it.''`
Shelby, an Alabama Republican, said he thinks President George W. Bush will support the Senate measure.
“This is a victory for the taxpayers,'' Shelby said in an interview with CNBC yesterday. “I think it's a win-win, a double win for all of us.''
Dodd said he planned to get it to the president's desk by July 4, adding that he didn't know whether Bush would support it.
“We appreciate and encourage the efforts to create a strong, independent regulator for the GSEs,'' White House spokesman Tony Fratto said yesterday.
“We look forward to seeing the details of the bill as it goes through Senate markup — especially provisions to expand programs of the Federal Housing Administration,'' he said.
Brian Faith, a Fannie Mae spokesman, didn't immediately return a call for comment. Sharon McHale, a Freddie Mac spokeswoman, declined to comment.
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