FHA Refi Plan Hits Speed Bump in Senate Committee

Congressional Democrats’ efforts to push through a housing aid bill that would expand the Federal Housing Adminstration’s authority to insure refinancing of troubled mortgages hit a snag Friday morning, with Senate Banking, Housing and Urban Affairs Chairman Chris Dodd (D-CT) tabling a planned May 6 markup of his FHA bill and a long-stalled proposal to revamp regulation of mortgage finance giants Fannie Mae and Freddie Mac.

Dodd’s FHA proposal is an analog to a similar proposal by House Financial Services Committee Chairman Barney Frank (D-MA) that was approved by a 46-21 margin earlier in the week.

The roadblock in this case appears to be primarily one man: Sen. Richard Shelby (R-Ala.), the ranking Republican on the Senate Banking Committee, who is either the last bastion of sensibility or a troublesome holdout, depending political affiliation.

Numerous media outlets reported Friday that Dodd chose to stall the planned mark-up because, in the words of his spokesman, he wants “to work toward a bipartisan consensus.”

It’s also likely that he wants to bundle the Frank/Dodd FHA insurance expansion effort with any effort to reform the GSEs, according to HW’s sources on Capitol Hill. Many Republicans and the White House have softened their previously hard stance towards Fannie and Freddie amid the housing crisis — with the notable exception of Shelby, we’re told. The House long ago passed its version of GSE reform, which received White House support, but Shelby’s staunch opposition has kept the Senate’s version of the bill stuck in the Banking Committee.

With Republicans largely balking at the proposed $300 billion FHA refi program — whether House or Senate versions — our sources suggested that a complex effort is now taking place behind the scenes in the hopes that bundling the two proposals will generate strong bipartisan support among both the House and Senate.

“Shelby has been an obstacle, but I think the pressure to get something done here will eventually rule the day, even within the GOP,” said one source, a lobbyist in Washington, DC. “Republicans and Democrats in Congress need to be able to tell their respective voting blocs that they’ve done something.”