Housing Bill Goes To Full Senate

Washington, DC, May 21, 2008--The U.S. Senate Banking Committee approved legislation on that could save thousands of homeowners from foreclosure.

Lenders who agree to eliminate a large portion of the original loan amount could earn a government guarantee for future mortgage payments.

Both the Senate bill and a similar version passed by the House  would create a fund under the Federal Housing Administration to allow distressed homeowners to refinance into government-guaranteed loans.

The bill must go before the full Senate for a vote. If approved, a compromise would have to be forged between the competing House and Senate versions.

The White House has threatened to veto the House bill, it said it will study the Senate version.

The foreclosure prevention plan that cleared the House could assist about 500,000 borrowers at a cost to taxpayers of about $1.7 billion, according to the nonpartisan Congressional Budget Office.

The Senate bill would cover the cost of the program by diverting money from an affordable housing trust fund to be set up under Fannie Mae and Freddie Mac.

Under the trust fund proposal, the two companies would contribute a share of their profits to create a pot of money for housing advocacy groups to expand affordable housing.