High gear on housing

Spurred by fears on Wall Street, key lawmakers on Monday moved to speed passage of a housing rescue package through Congress.

Senate Banking Committee Chairman Chris Dodd (D-Conn.) and House Financial Services panel Chairman Barney Frank (D-Mass.) both predicted swift passage of the legislation, which would strengthen the oversight of Fannie Mae and Freddie Mac.

{mosads}Both said it would include language requested by the administration on Sunday that would grant authority to the Treasury to bolster the two mortgage giants, which saw their stocks plunge last week.

Dodd also sought to reassure investors and homeowners about the solvency of the two private companies. “The fact is that Fannie and Freddie are in sound shape. We’re trying to deal with fear,” he told reporters in a conference call.

The stock market rose initially Monday on news that the federal government would aid Fannie and Freddie before falling again in afternoon trading.

Dodd said a measure granting nearly $4 billion in loans and grants to states to buy foreclosed properties would be dropped. The measure had sparked opposition from the White House as well as some House Democrats, who were insisting that the funds be offset.  

Alarm over the financial health of Fannie and Freddie, which together provide the bulk of financing for home loans in the U.S., has ratcheted up pressure on Congress to wrap up the housing bill quickly.

The blow-up of either company, which together have more than $5 trillion in debts and other obligations, could drag down the already ailing economy.

Frank on Monday said the woes of the two mortgage giants “changes the reality” for Republicans wishing to slow the bill down in the Senate.

He said the legislation could reach President Bush’s desk by the end of next week, predicting quick passage by the Senate of House-approved changes to the legislation as early as Thursday.

But consideration of the bill could spill over into next week, a House leadership aide said, if the administration’s proposal is not delivered to the Hill until Tuesday, and most lawmakers don’t see it until Wednesday.

Dodd hopes for a faster timetable, saying the Senate could finish work on the bill by the end of the week, provided the House acts sooner than Thursday and does not make changes to the bill that the Senate cannot swallow.

The Treasury language would provide it with temporary authority to boost each company’s $2.25 billion line of credit with the Treasury and to allow the Treasury to buy equity in the two companies, collectively known as the government-sponsored enterprises, or GSEs. Both changes would require congressional approval.

Senate Majority Leader Harry Reid (D-Nev.) said on Monday afternoon that he had not seen the administration’s legislative proposal yet, but that he would “like to” add the language onto the housing legislation, which the Senate approved on Friday.

He wouldn’t commit to finishing such a bill this week, but said that Democrats would “not stand in the way” of the legislation.

{mospagebreak}House Speaker Nancy Pelosi  (D-Calif.) spoke with Paulson late Saturday night. On Monday her aides spoke supportively of the administration plan, stopping short of a full endorsement.

“The Speaker is prepared to work in a bipartisan manner with the administration and congressional leaders on the administration’s new proposals for Fannie Mae and Freddie Mac and to work toward incorporating them in this legislation,” said Pelosi spokesman Nadeam Elshami.

At the heart of the legislation is a measure allowing the refinancing of up to $300 billion in troubled mortgages into cheaper loans backed by the government.

{mosads}The bill also contains tax incentives to prop up the housing market and a measure to give Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks a stronger regulator.

The $4 billion in grants to states to buy foreclosed properties has been one of the biggest sticking points for the legislation. The Congressional Black Caucus has wrangled with Blue Dogs Democrats over whether the funds should be offset, and the White House has expressed strong opposition to the provision.

Rep. Maxine Waters (D-Calif.), the most outspoken supporter of buying up foreclosed properties, had started drafting letters to Blue Dogs pointing out the number of foreclosed properties in their districts.

She sent letters last week to each Blue Dog member, attaching figures from the Save America’s Neighborhoods Coalition with foreclosure figures from their district.

For example, in the district of Blue Dog leader Allen Boyd (D-Fla.), 10 percent of loans are sub-prime, according to the figures, and 3 percent of all loans are in foreclosure.

Blue Dogs stressed that they don’t oppose purchasing foreclosed properties, they just think it should be offset by spending cuts or tax increases.

House Democratic leaders are committed to the idea of buying up foreclosed properties, a leadership aide said. They have discussed putting it into a “second stimulus” bill, but some members have balked at that idea, because there’s no clear path right now for a stimulus bill to become law. Others have discussed putting it into a continuing resolution, since appropriations bills are not expected to get signed into law.

The House and Senate also differ sharply on how much to raise the cap on the size of loan Fannie and Freddie can buy. The House wants to make permanent the nearly $730,000 limit that was passed in stimulus legislation earlier this year. The Senate has approved a $625,000 limit.

While Frank said he isn’t likely to push for the higher overall limit, he said he would insist on language that would effectively allow for higher caps where area median home prices are steep.

House conservatives, many of them longtime critics of Fannie Mae and Freddie Mac, are likely to raise objections to granting the administration authority to throw a lifeline to the mortgage giants.

Rep. Jeb Hensarling (R-Texas) on Monday afternoon asked colleagues to sign on to a letter to Frank asking him to move the administration’s legislative proposal through regular order, including hearings at the committee level, rather than attaching it to the housing legislation.

Manu Raju contributed to this article.