Senate Panel Schedules Vote on Housing Bill; Passage Seen as Unlikely

Efforts by Senate Banking Committee Chairman Christopher Dodd (D-CT) to gain bipartisan acceptance for a sweeping housing proposal broke down late Friday, leading Dodd to push ahead with a proposed markup of his own housing package in a committee hearing scheduled for this Thursday. Talks with Richard Shelby (R-AL), the senior Republican on the Banking Committee, collapsed late last week, the Washington Post reported Tuesday.

Dodd had originally postponed a committee vote on a proposed housing package in hopes that he could win bipartisan support for the bill before pushing it into a formal debate with committee members; without Shelby’s support, HW’s sources said, it’s unlikely that any Democratic-led housing proposal will win Congressional approval.

Nonetheless, Dodd introduced the Federal Housing Finance Regulatory Reform Act of 2008 on Monday, scheduling it for markup on Thursday morning. The bill mirrors similar legislation passed last week by the House.

“I will bring to the Committee on Thursday can make a very significant difference for our nation by reducing foreclosures and restoring the safe, sound and dynamic operation of the mortgage markets,” Dodd said in a press statement on Monday.

Like the House bill proposed by House Financial Services Committee Chairman Barney Frank (D-MA), the Senate bill would authorize the Federal Housing Administration to insure up to $300 billion in refinanced mortgages for troubled borrowers, when the investor agrees to take a haircut on a portion of the outstanding debt. Critics suggest such loans are significantly more likely to default than those mortgages already on the FHA’s books, essentially pushing the housing mess into the lap of taxpayers.

“Two months ago, the federal government provided $30 billion to help a company on Wall Street,” Dodd said. “For a fraction of that amount, we can assist deserving Americans on Main Street.”

President Bush has vowed to veto the housing package, characterizing the FHA expansion proposal as a bail-out for both lenders, investors and irresponsible borrowers.

Like its House counterpart, the Senate bill also would include provisions covering GSE reform, which has long stalled in Congress despite Republicans’ efforts. It does not include House-approved provisions that would seek to limit servicer liability in modifying loans, and does not include a proposal to permanently fix current temporary “jumbo conforming” lending limits in certain high-cost areas — both proposals were included in the housing package confirmed by House leaders.