Senators say homeowner aid will be in place by July 4

WASHINGTON — A broad bill to help homeowners struggling with their mortgages should pass Congress by July 4 and win President Bush's approval, key senators from both parties said Tuesday.

The prediction came as the Senate Banking Committee overwhelmingly approved a compromise bill to reform several federal housing agencies.

"This is a major step forward, but we have a ways to go" before a massive housing package can be sent to Bush for approval, said the panel's chairman, Sen. Christopher Dodd, D-Conn.

"Ideally, it will be done around the Fourth of July" and Bush will sign a package containing regulatory reforms, tax breaks and help for struggling home owners, he predicted.

Dodd's committee voted 19-2 in favor of the Federal Housing Finance Regulatory Reform Act, which expands the Federal Housing Administration's insurance program and overhauls supervision of Fannie Mae and Freddie Mac, government-sponsored companies that finance home loans. It appears on track to win full Senate support.

The committee's senior Republican, Sen. Richard Shelby of Alabama, said Congress should roll the legislation into an even bigger, "sweeping" package of housing-related aid. He believes the White House would support such a package since Republicans have won many compromises.

"I do believe the president will not veto this," as he had threatened earlier, Shelby said.

White House spokeswoman Dana Perino said the administration is still studying the legislation, but added that "we are very encouraged" by recent concessions.

Dodd and Shelby have been working for months to produce a bipartisan bill to insure up to $300 billion in new mortgages for homeowners in financial trouble. Such help could prevent an estimated 500,000 foreclosures.

Shelby pushed for, and won, a compromise addressing the administration's concern about the cost of the plan, estimated at $1.7 billion over five years. His solution was to pay for the program by temporarily diverting as much as $900 million a year from a fund to help low-income people obtain housing — a move that raised objections from some Congress members and outside groups.

The bill also provides an independent regulator for Fannie Mae and Freddie Mac.

The Senate leadership is expected to create a comprehensive housing package by combining the Dodd-Shelby bill with another measure the Senate already has approved. That bill created a first-time home buyers' tax credit and a $7,000 tax credit for purchasers of foreclosed homes.

The House too has a passed a housing bill and is ready to start negotiating with the Senate. This month, it voted 266-154 in favor of a bill to expand the FHA's authority to insure refinanced mortgages and modernize rules governing Freddie Mac and Fannie Mae.

Both bills create additional tax breaks for homeowners who do not itemize on their federal returns and offer $10 billion for mortgage revenue bonds to help refinance subprime loans.

House Financial Services Committee Chairman Barney Frank, D-Mass., issued a statement Tuesday saying "it is highly likely" a House-Senate deal can be reached. "There are of course some differences ... but I look forward to continued cooperation between members of the House and the Senate," he said.

One issue sure to get attention during such negotiations involves so-called "jumbo" loans for people buying expensive houses. Currently, Fannie Mae and Freddie Mac are restricted in the size of loans they can purchase. Dodd had wanted to raise the cap from $417,000 to $625,000. But Shelby insisted on setting the loan limit at $550,000.

Sen. Charles Schumer, D-N.Y., said that in expensive markets such as New York City, average working families need "jumbo" loans, and failing to help them would be "a big mistake."

Sen. Mel Martinez, R-Fla., agreed, saying Florida too has some markets with high average prices. "I'm sympathetic to that issue," he said.

Dodd said their concerns will be addressed in next month's negotiations. "I agree with you," he said. "But this is not the final say."

Sen. Johnny Isakson, R-Ga., chief backer of the tax credit for buyers of foreclosed houses, said he is "encouraged' by the compromises being made, and believes his fellow lawmakers are committed to reaching a final package. "I think they want to get this done," he said.