Senators Move
On Housing Relief

WASHINGTON -- Key senators agreed on a $15 billion bipartisan plan to spur the housing market, a surprisingly fast compromise that shows how political momentum is shifting toward a more aggressive response to the struggling economy.

The housing package, which the Senate will begin debating Thursday, represents compromise on both sides. Republicans were leery of starting a process that may lead to greater intervention in the economy. But after hearing from homeowners and businesses during their two-week break, lawmakers said they couldn't afford to appear obstructionist. More Republican than Democratic incumbents are facing tough fights to keep Senate seats this year.

Democrats, for their part, dropped a bankruptcy provision opposed by Republicans, even though it was a major part of their housing agenda. They, too, are under pressure to show accomplishments this year, amid low public-approval ratings for Congress. They may try to add the provision as an amendment, but it faces an uphill fight.

Democrats also agreed to halve funds for counseling at-risk homeowners to $100 million. Republicans accepted $4 billion in block grants for communities to buy and refurbish foreclosed properties, and they agreed to a smaller tax credit for homeowners than they initially wanted.

The plan would raise the size of loans backed by the Federal Housing Administration to $550,000 and increase the down-payment requirement to 3.5% from 3%. The bill doesn't include a controversial Democratic proposal to give the FHA the ability to insure $400 billion in mortgages. Sen. Chris Dodd (D., Conn.), the concept's sponsor, said he will hold hearings later on the idea.

The legislation includes a $6 billion tax break for home builders and other troubled companies, an additional $10 billion of mortgage-revenue bonds that states can issue for refinancing and for first-time home buyers, and a provision to allow an estimated 28 million homeowners who don't itemize their taxes to get a deduction on their property taxes. In addition, people buying a residence facing foreclosure would get a two-year, $7,000 tax credit.

The White House greeted the compromise with muted enthusiasm. Spokesman Tony Fratto praised senators for agreeing to include the FHA revamp and the enhanced bond-issuance authority, although "we obviously want to see the details to see if they're in a form we can support."

The White House continues to oppose funding the purchase of foreclosed homes and the tax credit for home buyers. Mr. Fratto didn't say whether Mr. Bush would sign a bill if it reflected Wednesday's compromise. "This bill is a first step," he said. "It's going to the floor. It's going to be debated. We hope it will be amended."

Some parts of the Senate plan face an uncertain future in the House, where Democrats are less focused on tax relief. Brendan Daly, a spokesman for House Speaker Nancy Pelosi (D., Calif.) said the Senate package is a "good first step" but "we will need to review the details and fine-tune specific provisions that need to be stronger."

Rep. Barney Frank (D., Mass.), chairman of the House Financial Services Committee, is likely to balk at the increase in the down payment required to get FHA backing for mortgages.

Election years often tempt lawmakers to score political points. This year, voters could see pre-election fights over Iraq and fiscal policy, especially whether to renew President Bush's income-tax cuts.

-- Damian Paletta, Greg Hitt and Michael M. Phillips contributed to this article.

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