Lawmakers Seek Shortcut In Negotiating Housing Bill

Senate and House leaders are taking the unusual step of negotiating a final bill to address the nation's housing crisis even before the Senate adopts its own version, trying to short-circuit a legislative process that might otherwise drag well into the summer.

Senior lawmakers are meeting behind closed doors to draft what they hope will be a measure to help homeowners facing foreclosure and to create a strong new regulator to oversee the mortgage financing giants Fannie Mae and Freddie Mac.

Talks began early this week after the measure's advocates decided they would not wait for action by the full Senate, where parliamentary procedures and the process for amending bills could stall the legislation. Moreover, the Senate calendar is tightly scheduled between now and the July 4 break.

Instead, lawmakers aim to resolve the outstanding differences between the two bills already approved by the House and the Senate Banking Committee, then bring the compromise measure up for a final vote in the two chambers.

Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) and House Financial Services Committee Chairman Barney Frank (D-Mass.) have said they want to get a bill to the White House before the July break.

Dodd, Frank and their staffs have embarked on initial discussions to delineate the outstanding issues. Lobbyists and congressional aides said yesterday that several sticking points remain to be resolved.

One of the largest centers on a special fund designed to help build low-income housing. The Senate Banking Committee's bill relies heavily on the fund to pay for efforts to prevent hundreds of thousands of homeowners from falling into foreclosure. Frank is reluctant to siphon off too much money from the fund, which would be underwritten by Fannie Mae and Freddie Mac.

Both bills would authorize the Federal Housing Administration to help at-risk borrowers trade mortgages that have escalating monthly payments for more-affordable loans backed by the federal government. Under a deal struck on the Senate Banking Committee by Dodd and Sen. Richard C. Shelby (Ala.), the panel's ranking Republican, part of the money designated for low-income housing would be diverted for three years to cover the cost of the FHA program. The House bill, in contrast, would not pay for the loan rescue program, which the Congressional Budget Office projects would cost taxpayers $1.7 billion over five years.

Another question is how high to set the limits for mortgage loans backed by the FHA, as well as those that can be bought by Fannie Mae and Freddie Mac. Under the House bill, mortgages up to $729,900 would qualify while the Senate Banking Committee measure sets a $550,000 limit.

The National Association of Realtors is eager for the higher number, saying that many high-cost regions of the country would otherwise be left out. This week, the association asked its members to call or e-mail their elected officials to urge them to accept the House provision. The lobby group is also planning to buy ads advocating the higher conforming loan rates in Capitol Hill publications, according to an official with the Realtors who spoke on the condition of anonymity because he was not allowed to speak publicly.

Officials at Fannie Mae and Freddie Mac say they are generally happy Congress is moving to complete the bill. After years of opposing such legislation, they see the bill as a way to stabilize their situation in what has been a volatile marketplace.

But Fannie has expressed some worries. Fannie's chief executive, Daniel H. Mudd, has said he is not pleased with the Senate Banking Committee's provisions that would allow the new regulator to limit his company's holdings of large-dollar mortgages, known as jumbo loans, in its portfolio and to have a strong say over what new products the company can offer and whether it can raise capital.

Mudd told the American Banker earlier this month that lawmakers should be as specific as possible about what powers it gives the regulator, especially over capital.

"The more that's elaborated in the legislation, the better," he told the American Banker. "The whole mortgage finance market is built around how much capital we hold."

Staff writer Lori Montgomery contributed to this report.