UPDATE: US Sens Dodd, Shelby Reach Areement On Housing Aid
Monday May 19th, 2008 / 23h21
(Updates with comments from Dodd, details throughout) By Michael R. Crittenden Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- The top two members of the U.S. Senate Banking Committee said Monday they have reached an agreement on a housing aid package that includes a regulatory overhaul for Fannie Mae (FNM) and Freddie Mac (FRE). Banking Committee Chairman Christopher Dodd, D-Conn., and ranking Republican Richard Shelby of Alabama said in a release that week-long negotiations have resulted in a compromise both lawmakers could support. The legislation combines a proposal to use the Federal Housing Administration to help refinance troubled borrowers with new loans, with the new regulator for the two government-sponsored enterprises and the 12 Federal Home Loan Banks. The centerpiece of the agreement is a proposal to divert money from an affordable housing fund created by the bill to help pay for up to $300 billion in Federal Housing Administration mortgage guarantees. The fund would be financed by Fannie Mae (FNM) and Freddie Mac (FRE), and Dodd told reporters that the agreement he reached with Shelby would use 100% of the money from the first year of the affordable housing fund to pay for the aid for cash-strapped homeowners. Half of the money from the second year would go to cover the FHA program and 25% in the third year. Dodd didn't offer a specific estimate of how much would be diverted from the affordable housing program, but the Senate bill is expected to cost less than the $1.7 billion estimate for a House-passed bill. "We get to keep the affordable housing program in perpetuity and we get to fund this immediate crisis," Dodd said in a conference call with reporters. The Banking panel is scheduled to vote on the measure Tuesday morning. "I think it's a win-win, a double win for all of us," Shelby said in an appearance on CNBC, adding "it's a great compromise." Shelby's support should encourage other GOP lawmakers to vote for the legislation, though Dodd said he wasn't sure if the legislation would receive unanimous support from his committee. He did, however, say he was optimistc that the negotiated legislation could be attractive to the White House. "There have been some positive reactions," Dodd said, noting that the White House hasn't been openly hostile to the Senate measure like it was to a housing aid package recently passed by the House of Representatives. The Banking panel didn't immediately release specific details of the agreement and what changes had been made to the bill. Dodd said negotiations had resulted in some alterations, including stopping the FHA guarantee program in 2011 rather than 2012. This, along with other changes, should lower the cost of the legislation, he said. Dodd did make clear that his agreement with Shelby doesn't go as far as some Republicans would like in clamping down on Fannie Mae and Freddie Mac. In response to a question, Dodd said the regulator couldn't address systemic risk issues and couldn't arbitrarily require the firms to raise capital. "A strong regulator is very much in place," Dodd said, noting that the regulator could require the companies to raise capital if he was concerned about their safety and soundness. "We want to make sure they have the strength and stability to continue to play a critical role" in the housing market," Dodd said. The panel was originally scheduled to vote on the measure last week, but despite frantic negotiations between Dodd, Shelby and their staffs, the panel had to postpone consideration. -By Michael R. Crittenden, Dow Jones Newswires; 202-862-9273; michael.crittenden@dowjones.com
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