Mortgage rescue advances

A mortgage rescue to help hundreds of thousands of struggling homeowners avoid foreclosure and get more affordable, safer loans passed the Senate overwhelmingly Friday, but it faces a bumpy road amid continuing turmoil in the housing market.

With economic issues topping voters’ concerns, the 63-5 vote showed a keen interest by Democrats and Republicans in giving election-year help to distressed homeowners.

The plan lets homeowners buckling under mortgage payments they can’t afford keep their homes and get more affordable mortgages backed by the Federal Housing Administration. Banks that agreed to take substantial losses on those distressed loans could avoid costly foreclosures and be assured of recovering at least some money.

The program would let the FHA insure as much as $300 billion in new mortgages, helping about 400,000 homeowners.

It still faces challenges, however, with the House planning to rewrite key details and the White House threatening a veto without major changes.

“It’s not the final stop, but it is a major stop in getting this bill done,” said Sen. Christopher J. Dodd (D-Conn.), Banking Committee chairman. “For those who said this Congress cannot come together in a bipartisan fashion to do something responsible about housing -- this bill does that.”

Rep. Barney Frank (D-Mass.), the Financial Services Committee chairman and an architect of the bill, says the few but significant revisions House leaders seek could be made in as little as one week.

But key players are bracing for intense negotiations to resolve the differences. They hope to smooth over disputes with the White House at the same time, with an eye toward producing a bill President Bush could sign this month.

The measure includes a long-sought modernization of the FHA and would create a new regulator and tighter controls on Fannie Mae and Freddie Mac, the government-sponsored mortgage giants. It also would provide $14.5 billion in housing tax breaks, including a credit of up to $8,000 for first-time home buyers.