NEW YORK (CNNMoney.com) -- Senate Democrats and Republicans, under pressure in an election year to do more about the housing crisis, worked over night to draft a bipartisan housing stimulus bill that could be debated as early as Wednesday evening.
Senate Majority Leader Harry Reid, D-Nev., said the parties had "agreed in principle" on measures to be included in the bill. But those measures have not been made public yet.
Political observers expect that the bill will contain funding to help borrowers avert foreclosures and help boost activity in neighborhoods with vacant properties. It's also expected to include a business tax break and possibly some measures designed to make loans insured by the Federal Housing Administration more accessible.
"We hope to quickly come to a consensus to move this bill to the floor, consider amendments to it, and pass strong legislation that helps struggling homeowners and our economy as a whole," Reid and Senate Minority Leader Mitch McConnell, R-Ky., said in a statement.
Here are some of the leading ideas under consideration:
Modernize the FHA: A likely element would overhaul the Federal Housing Administration's loan insurance program, which helps homebuyers with weak credit or little cash get an affordable mortgage.
Key proposed changes to the FHA loan program have included permanently raising the size of loans the FHA may insure; reducing the program's down payment requirements to 1.5% from 3%; and making it easier for borrowers in high-cost loans to refinance.
Help for troubled borrowers trying to refinance: The bill could let states offer $10 billion in tax-free municipal bonds, the proceeds from which would be used to subsidize mortgage refinancing for subprime borrowers trying to get out of unaffordable loans.
Under current law, state and local housing agencies are allowed to issue tax-free bonds only to help subsidize mortgages for first-time homebuyers or those purchasing property in distressed areas.
Tax credits for buying troubled properties: The bill could create a tax credit of up to $15,000 for homebuyers who buy foreclosed homes, homes where the current owner is in default or homes built after September 2007 that have been sitting empty.
Bigger tax break for homebuilders: The bill could expand the so-called net operating loss carryback. The provision would extend to five years from two the time a company may apply its 2006 and 2007 losses to past tax bills.
Homebuilders who enjoyed a profit surge during the housing boom would be able to offset those profits with their losses due to the downturn. The thinking is that the break could help homebuilders preserve jobs and stay in business.
Money to aid areas hit by foreclosures: The bill could allow $4 billion in grants to state and local governments to buy and rehabilitate foreclosed homes. The White House has said, however, it considers such a provision a bailout for lenders and speculators.
More money for consumer counseling: The bill may call for $200 million more for housing counselors working with homeowners at risk of foreclosure.
Greater transparency for borrowers: The bill might call for greater disclosure in the mortgage application process so consumers could more easily understand the terms of their loans and won't be surprised by big payment increases. See Also
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