WASHINGTON Senate Democrats and Republicans reached a tentative deal Wednesday on a package of legislation to help homeowners facing foreclosure, including new tax breaks intended to help stabilize the wider housing market.
The bill, which is expected to go to the Senate floor today, includes a new standard property-tax deduction of $1,000 for couples and $500 for individuals that will benefit 28.3 million tax filers who do not itemize deductions on their annual returns.
The bill also includes $10 billion in tax-exempt bonds for local housing agencies to refinance subprime loans and provide new mortgages for first-time home buyers, $4 billion in grants for local governments to buy foreclosed properties and $100 million to expand counseling for homeowners at risk of defaulting on their loans.
In addition, it would give a $7,000 tax credit to purchasers of foreclosed homes and would provide a new tax break for struggling homebuilders, allowing them to claim current losses against taxes paid in prior, more profitable years. Officials said the proposals would cost taxpayers $15 billion to $20 billion, with details still being worked out.
Many of the components in the Senate package have been under consideration by the Financial Services Committee in the House, making it likely that anything approved by the Senate could move quickly to final approval in Congress and make its way to President Bush's desk, where political pressure to help homeowners would probably limit the chances of a veto.
But even as Senate leaders cheered the deal as the fruit of new bipartisan resolve to address problems in the housing market, they said that a more expansive foreclosure-assistance plan, to extend an added $300 billion to $400 billion in federally guaranteed mortgages, would require separate legislation, after more hearings and negotiations.
"I made a passionate plea for this proposal," said Sen. Christopher J. Dodd, D-Conn., the chairman of the Banking Committee. But he said many Republicans were not ready to sign on.
Dodd announced the broad parameters of the deal at a news conference on Wednesday with Sen. Richard C. Shelby of Alabama, the Banking Committee's senior Republican. And he insisted that even the more modest package represented a crucial step forward.
The tentative deal comes as lawmakers have voiced, with increasing urgency, the need to extend a helping hand to individual homeowners caught in the turmoil of the mortgage industry and the overall downturn in the housing market.
Senate Republicans, in particular, had felt compelled to move housing legislation quickly after the Federal Reserve's intervention to avert the collapse of Bear Stearns.
"We have seen how we have dealt at least to some degree with Wall Street, a major collapse of a major investment bank," Dodd said. "This effort that we have put into the last several days, I think, is a major step in the right direction to offering some real hope to people on Main Street."
The package announced by Dodd and Shelby effectively stripped out the most contentious provision of a Democratic housing bill that the Republicans blocked in late February a proposal to change the bankruptcy code to allow judges to modify the terms of mortgages on primary homes.
That provision will instead be offered as an amendment by its main supporter, Sen. Richard J. Durbin, D-Ill. Other amendments are expected and it was unclear how quickly the Senate would move to a vote.
The White House on Wednesday offered guarded praise but did not immediately commit to supporting the measure. "This bill is a first step," said Tony Fratto, the deputy press secretary. "It will be debated and, we hope, amended on the floor."
The new bill would set the cap on mortgages insured by the Federal Housing Administration at $550,000 in the most expensive real-estate markets.
The economic stimulus package approved by Congress in February temporarily raised the limit to $729,750, from $362,790, in the most expensive markets, but lawmakers disagreed over where to set the cap over the long term. The bill also will increase the down payment required for FHA loans to 3.5 percent, from 3 percent.