WASHINGTON (AP) — A federal mortgage rescue to help hundreds of thousands of homeowners avoid foreclosure is in limbo, with the Senate about to pass a bill that has no chance of winning House approval.
Democratic divisions over small but significant details are delaying the plan, despite keen interest by lawmakers in both parties to enact election-year help targeted to the housing crisis at the root of voters' anxiety. Complicating the picture is a White House veto threat.
The measure is expected to pass easily as early as Thursday in the Senate, where it consistently has drawn support broad enough to overcome a veto. But then it will head back where it started, to the House, where leaders have made it clear they must rewrite key portions of it before it has any chance of passage.
Odds are still good that Congress and the White House will be able to agree on a broad housing package this summer to address the mortgage meltdown that has spawned huge numbers of foreclosures throughout the country. But first, Democrats have to smooth out their own divisions on the plan.
House leaders are working to make it more palatable to conservative "Blue Dog" Democrats who complain it would swell the deficit, and lawmakers from the highest-cost housing markets, including Speaker Nancy Pelosi, D-Calif.
Some of the changes being considered could sap the GOP support that the housing rescue needs to clear Congress and be signed by President Bush.
The dilemma reflects a tricky dynamic at work on the housing package, the centerpiece of which would have the Federal Housing Administration back $300 billion in new loans to help borrowers buckling under high monthly payments refinance into safer, more affordable fixed-rate mortgages.
The legislation contains several elements Bush has demanded, including long-awaited overhauls of the FHA and Fannie Mae and Freddie Mac, which together provide huge amounts of cash flow to the home loan market by buying loans from banks. But Bush objects to some central parts, particularly $3.9 billion to buy and fix up foreclosed properties.
Democratic leaders have toiled to cut a bipartisan housing deal that Bush could accept, hoping to claim credit for addressing a chief concern among voters. In the process, though, they have had to jettison some top priorities — including affordable housing funds for states affected by Hurricane Katrina and billions of dollars for buying and rehabilitating foreclosed properties in the hardest-hit neighborhoods.
Now their divisions over the package appear to be putting the compromise at risk.
Rep. Barney Frank, D-Mass., the Financial Services Committee chairman who won House approval of his version in May, has made it clear he does not plan to accept the Senate proposal without changes. He still predicts the package could be enacted by the end of the month.
Sen. Christopher J. Dodd, D-Conn., the Banking Committee chairman, is not so sure. He said further changes could cost the bill crucial momentum.
"My hope would have been that this bill we'll send them is something the House could support — that's still my hope," said Dodd, who crafted the bill with Alabama Sen. Richard Shelby, the panel's senior Republican. "We're getting down to the time here where we may not get a bill if this thing goes on much longer."
Pelosi is working to quell a revolt by the Blue Dogs, who insist that housing tax breaks and any spending in the package must be paid for with tax increases or spending cuts to prevent an increase in the deficit.
That means rewriting a $14.5 billion array of housing tax breaks, which falls $2.4 billion of being fully offset.
It's also sparked an intense push by black lawmakers — who wanted far more money for fixing up foreclosed properties — to keep the $3.9 billion in the Senate measure in the face of the opposition from Blue Dogs and the White House.
"We're going to fight on this," said Rep. Maxine Waters, D-Calif., who made an impassioned plea for the funds in a closed-door meeting of House Democrats this week. "It's extremely important that we fight to help the communities that are being devastated in this subprime (mortgage loan) meltdown."
The Congressional Black Caucus also opposes language in the Senate bill that bars the FHA from insuring mortgages obtained by borrowers whose downpayments were paid by the seller.
Bush also is pressing to do away with seller-funded downpayment assistance, a move black leaders say would disproportionately hurt African Americans.
Steve Preston, the secretary of Housing and Urban Development, said mortgages in which the seller pays the downpayment default at rates three times higher than other home loans, exposing FHA to undue risk.
Lawmakers "know our views very strongly," he told reporters Tuesday.
The two sides are also still divided on how high to place the limits on mortgages that the FHA can insure and Fannie and Freddie may buy. The House sets the caps at about $730,000 for the highest-cost housing markets, while the Senate ceiling is $625,000. And they are battling over when the new regulations for Fannie and Freddie can take effect. The Senate would impose them immediately, while Frank and House leaders are pushing for a six-month phase-in, which would leave them to a new president.
Another House vote on the bill could provide more time for lawmakers and the White House to iron out their differences. Frank and other leaders have been in behind-the-scenes talks with Treasury Secretary Henry Paulson in hopes of finding a compromise that could prompt the White House to lift its veto threat.
