Senate leaders advance foreclosure-crisis bill

Republican and Democratic leaders reached common ground on some issues.

WASHINGTON (AP) — Under growing pressure from voters to do something about the nation’s home foreclosure crisis, top Senate leaders agreed Tuesday to at least start with a plan that can win the support of both Democrats and Republicans.

The pact between Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., ended weeks of partisan bickering over what to do about the crisis in the housing market and the toxic effect it’s having on the economy.

There is considerable common ground on several steps that can be taken to improve the situation, but battles over how to structure the debate threatened to produce gridlock.

Reid agreed not to bring up a Democratic plan containing a controversial provision — strongly opposed by Republicans and President Bush — to give bankruptcy judges power to cut interest rates and principal on troubled mortgages. That plan stalled a month ago.

Instead, Senate Banking Committee Chairman Christopher Dodd, D-Conn., and the panel’s top Republican, Richard Shelby of Alabama, were instructed to forge a compromise by Wednesday afternoon.

The legislation is likely to draw on elements of the Democratic plan such as letting states issue $10 billion in tax-exempt bonds to refinance subprime loans and permitting home builders and other money-losing businesses to reclaim previously paid taxes.

Democrats also want to provide $4 billion to states to buy up and refurbish foreclosed homes, a plan that the administration opposes as a bailout for lenders and speculators.

Senators in both parties gave the arrangement a 94-1 stamp of approval on a previously scheduled procedural vote. Sen. Jim Bunning, R-Ky., was the sole “nay” vote.

The upcoming bill also is sure to attract a GOP amendment by Sen. Johnny Isackson of Georgia to award $15,000 tax credits to people who buy and move into foreclosed homes. That would sharply boost demand, Isackson says. Lawmakers in both parties support the idea.

The measure is also likely to include a plan by Dodd to have the Federal Housing Administration guarantee perhaps $400 billion worth of refinanced loans if lenders reduce loan amounts to reflect reduced home values. The measure would force banks to make less money on the loans but would also reduce their credit exposure.

There is also bipartisan backing for $200 million in new money for debt counselors to help homeowners negotiate with lenders. A floor battle still looms over whether to change bankruptcy laws to help borrowers trapped in subprime mortgages keep their homes.