Obama administration says housing finance reform to advance in Senate soon

Margaret Chadbourn
U.S. Housing and Urban Development Secretary Shaun Donovan announces February 9, 2012 in Washington that the federal government and 49 state attorneys general have reached a $25 billion agreement with the nation's five largest mortgage servicers to address mortgage loan servicing and foreclosure abuses. REUTERS/Gary Cameron

By Margaret Chadbourn WASHINGTON (Reuters) - The Senate Banking Committee is expected to move forward within "the next few weeks" with bipartisan plans for overhauling the mortgage finance system, Housing and Urban Development Secretary Shaun Donovan said on Wednesday. "We'll have a bipartisan product relatively soon," Donovan said at a forum sponsored by Politico in Washington. "There is a way to find a compromise." President Barack Obama as well as Democrats and Republicans in Congress want to wind down Fannie Mae and Freddie Mac. Leaders of the Senate banking panel wanted to roll out a housing reform bill by the end of 2013, but missed the target and have yet to introduce legislation. "We have a relatively short window to get something done," Donovan said. "There is a great deal of bipartisan groundwork." Senate Banking Committee Chairman Tim Johnson and Senator Mike Crapo, the panel's top Republican, are aiming to produce a bipartisan bill that builds on legislation that 10 senators had already co-sponsored to wind down Fannie Mae and Freddie Mac and allows for a federal backstop for lending in a crisis. While momentum is building, it remains unlikely Congress will enact a law this year. The challenge for the Senate Banking Committee is whether Johnson will be able to coax the panel's Democrats that have started to splinter over concerns about how much the bill reduces the government's support for the housing market, and fails to promote affordable housing programs. Republicans may support the overhaul but it's unclear whether they would back down if more emphasis is placed on low-incoming housing initiatives in the negotiation process. "We're making real progress, but there is more that we can do," Donovan said. "Both sides could walk away with something." Any bill offered in the Senate must be reconciled with a Republican-backed measure in the House of Representatives that greatly limits the government's housing-finance role. Midterm elections also complicate the congressional calendar and detract from efforts to get something done. The U.S. government seized Fannie Mae and Freddie Mac in 2008 after they were pushed to the brink of insolvency by investments in bad loans. The duo took $187.5 billion in taxpayer aid but have since paid about $185.2 billion in dividends to the government, thanks to the U.S. housing market rebound. (Reporting by Margaret Chadbourn; Editing by Chizu Nomiyama)