On Wednesday night, Senators Chris Dodd (D-CT) and Richard Shelby (R-AL), from the Senate Committee on Banking, Housing and Urban Affairs, hammered out a a bipartisan deal designed to address the housing crisis. The so-called Foreclosure Prevention Act of 2008 proposes a $10 billion increase in tax-free, state-issued bonds to help troubled homeowners refinance, $4 billion in community development block grants to permit states to buy foreclosed properties, and an additional $100 million for housing counseling. The bill would also establish a $7,000 tax credit to buyers of foreclosed homes, and would include FHA modernization provisions designed to further increase the government lending program’s footprint in mortgage banking.

Industry representatives seemed relieved that the bill didn’t include hotly-contested provisions regarding Federal bankruptcy reform for troubled borrowers, with Kieran Quinn, chairman of the Mortgage Bankers Association, praising the FHA reform provisions. “A more modern and effective FHA, mortgage revenue bonds for state housing finance agencies, additional money for counseling – these are all things that will be of great help to struggling homeowners,” he said in a statement released earlier this week. “I hope that Senators will keep their eye on that goal, and not attempt to attach to the bill partisan provisions such as bankruptcy cramdown that would increase borrowing costs on all future borrowers and delay progress on this important bill.” Consumer groups, of course, have soundly panned the housing proposal for that exact reason. More than 15 consumer-led groups put out a press release Thursday suggesting the bill was designed to bail out lenders and builders. “The Senate Housing package misses the single most significant step needed to help the 20,000 American families with subprime loans that are losing their homes each week through foreclosure: the bankruptcy amendment,” the groups said. “We are left with a bill loaded with special considerations for mortgage companies and builders that does very little for homeowners who were sold predatory loans by mortgage lenders.” Legislators are clearly facing intense pressure to act on current woes in the housing and mortgage markets — and all signs so far suggest that even the current bill won’t be the last. Robert Schroeder at MarketWatch reports that Dodd is going to delve into the issue of foreclosures in an upcoming hearing:

Sen. Christopher Dodd, D-Conn., said Friday that he will have a hearing about heading off foreclosures, since the broad bill agreed to by senators doesn’t address that issue. He has proposed allowing the government to insure refinanced mortgages. “We ought to be dealing with the issue of ‘how do we keep people in their homes where we can?'” Dodd told reporters on a conference call Friday.

Sources tell HW that the hearings will likely center on the so-called bankruptcy cram-down legislation, although it isn’t clear yet who will be called to testify before the Senate panel. “There is too much political pressure for House or Senate leaders to let this [current bill] collapse,” Jaret Sieberg, an analyst with the Stanford Group Company, wrote in a widely-distributed research note earlier this week. “To us, the bigger question is when it passes.” Sieberg, along with other sources, expects the bill to pass before Congress heads off to its Memorial Day recess. “Politically, we do not see how the president could veto this bill,” he wrote.