NEW YORK (CNNMoney.com) -- A Senate panel was poised Thursday to reach a bipartisan compromise on a bill that would allow the government to insure up to $300 billion of home loans and overhaul oversight of key players in the mortgage industry.
Legislation sponsored by Banking Committee Chairman Christopher Dodd, D-Conn., would allow at-risk borrowers with hybrid adjustable rate mortgages to refinance into fixed-rate mortgages. The new loans would be insured by the Federal Housing Administration and be available to homeowners whose lenders agree to write down loan balances to affordable levels.
The proposal hit resistance from Banking Committee Republicans, led by Richard Shelby, R - Ala., who objected to risking taxpayer money to bail out lenders and borrowers who had acted imprudently.
Shelby reportedly wants Freddie Mac (FRE, Fortune 500) and Fannie Mae (FNM, Fortune 500), the government-sponsored enterprises created to boost the mortgage markets, to provide funds to backstop the FHA program, rather than the FHA itself, to lower the risks to taxpayer.
Dodd and Shelby were negotiating Thursday ahead of a scheduled 3 p.m. ET.
Even if the two committee leaders reach agreement, it remains an open question whether President Bush would support the bill. He has threatened to veto a similar bill sponsored by Rep. Barney Frank, D-Mass., and passed by the House last week.
Pressure has been building in Washington to respond to the huge increases in foreclosure filings. Republican lawmakers from states with high foreclosure rates who are up for re-election this year might feel inclined to get behind the rescue effort. See Also
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