WASHINGTON - A plan to rescue hundreds of thousands of homeowners at risk of foreclosure cleared a major political hurdle yesterday, improving the chances of an election-year effort to address the housing crisis.
The Senate Banking Committee voted, 19-2, to approve the bill. Every Republican except Sens. Jim Bunning of Kentucky and Mike Enzi of Wyoming voted with the Democratic majority, which includes Sens. Tom Carper of Delaware, Robert Menendez of New Jersey, and Bob Casey of Pennsylvania.
The vote clears the way for Senate approval of the plan.
The White House threatened to veto a similar bill that passed the House this month, citing the potential cost to taxpayers. Yesterday, White House officials were more encouraging.
The legislation would authorize the Federal Housing Administration to help at-risk borrowers trade exotic mortgages with escalating monthly payments for more affordable loans backed by the federal government.
It also would create a new, stricter regulator for mortgage giants Fannie Mae and Freddie Mac with wide power over the companies' finances. And it would dedicate part of their profits - $500 million a year - to a new fund for low-income rental housing.
Under a deal struck between Banking Committee Chairman Christopher J. Dodd (D., Conn.) and Alabama Sen. Richard C. Shelby, the panel's senior Republican, part of the low-income housing money would be diverted for three years to the FHA program.
Senate Republicans had refused to support further government intervention in the housing market unless taxpayers were protected.
Before the legislation reaches the president, the Senate will have to reconcile differences with the House bill, championed by Financial Services Committee Chairman Barney Frank (D., Mass.).
The proposal marks Washington's most ambitious response to the housing crisis, which has thrown 1.5 million homeowners into foreclosure.