Senators are expected to revise their housing-assistance package to set loan limits for mortgage giants Fannie Mae and Freddie Mac at $625,000 in an effort to split the difference with House negotiators on a final package and help steady an increasingly rattled home mortgage market.
Senate Banking Chairman Christopher Dodd made a few significant changes to the bill he introduced with ranking member Richard Shelby and that was approved by their panel last month. They hope to strike a deal with a competing version sponsored by House Financial Services Chairman Barney Frank, according to an outline of the proposal circulated among lobbyists Monday night.
Dodd's office was expected to release details of the bill today as it should come to the Senate floor this week.
The most important change would set Fannie and Freddie loan limits at $625,000, according to the outline, which is $75,000 more than called for in their original bill.
By contrast, the Frank bill would maintain the loan limits at approximately $730,000, a benchmark that was established in the economic-stimulus package passed in February but lasts only through the end of the year.
The Senate version would set loan limits for the Federal Housing Administration's mortgage insurance program at $625,000 as well, according to the outline.
A Frank spokesman said Monday night that he could not confirm if the Massachusetts lawmaker had signed onto the new Senate version.
Frank had been arguing for maintaining the $730,000 loan-limit level to help high-cost states and to give Fannie and Freddie more flexibility to hold loans within their combined $1.5 trillion portfolio, rather than securitizing the mortgages and selling them off onto the secondary market.
The Senate bill approved last month would require that the two government-sponsored enterprises could only securitize loans for more than $417,000 and not hold them in their portfolios, restricting their ability to play a greater role in the jumbo-loan market.
As Frank and Dodd tried to get on the same page with the larger bill, the tax-writing panels were still working on cobbling together the necessary offsets for the estimated $11 billion-$14 billion package. Tax provisions in the revised package hew much closer to the House version than an earlier Senate bill that was widely panned because it provided tax breaks to those outside of the housing industry, such as automakers, airlines and other beleaguered industries.
The measure, according to the outline, would include a homebuyer's credit, an increase in the mortgage-revenue bond cap and an expansion of the low-income housing tax credit, which reduces taxes for real-estate investors on specific developments for the poor, allowing them to either use the tax breaks or sell them to other investors to raise capital for construction.
One offset option that appeared to be gaining steam was an $8 billion provision, included in President Bush's budget, which would require investment brokers to report the cost-basis of securities transactions to the IRS to produce better revenue collections.
The offset was contained in the House version of the housing tax bill, which also would delay for one year new worldwide interest allocation rules for multinational corporations, raising $3 billion in revenues.
The tax extender bill pending on the Senate floor would delay the rules for 10 years.
The revised Dodd-Shelby package would include provisions in the earlier bill, such as language that would allow the FHA to guarantee up to $300 billion in new mortgages for at-risk, subprime borrowers, revamp the FHA, and provide a new, strengthened regulator for Fannie and Freddie and the Federal Home Loan Bank System. Both GSEs, which are publicly traded, were mired in accounting scandals in recent years.
The outline noted that House Speaker Pelosi is advocating the effective date for the new regulator to be extended by six months to allow the new administration to select the regulator, rather than the Bush White House.
It also would authorize grants for local governments and other housing groups to purchase and revitalize foreclosed properties and provide additional money for foreclosure counseling, according to the outline.
Also included would be language that would temporarily increase the guarantee amount for VA mortgages and requirements that a lender wait for one year before enacting foreclose proceedings on a home owned by an armed services member.
This article appears in the June 21, 2008, edition of National Journal Daily.