Housing Bill Clears Key Senate Test

WASHINGTON — A foreclosure rescue bill cleared a key Senate test yesterday by an overwhelming margin, with Democrats and Republicans both eager to claim election-year credit for helping hard-pressed homeowners.

The mortgage aid plan would let the Federal Housing Administration back $300 billion in new, cheaper home loans for an estimated 400,000 distressed borrowers who otherwise would be considered too financially risky to qualify for government-insured, fixed-rate loans.

An 83-9 vote put the plan on track for Senate passage as early as today, but President Bush is threatening a veto, and Democrats are fighting each other over key details. Those challenges will probably delay any final deal until mid-July.

The bill advanced as separate reports underscored rising economic anxiety: Consumer confidence slid to its lowest level in more than 16 years, and closely watched indices showed a continuing decline in home values.

Still, conservative Democrats are concerned about how to pay for the measure, and members of the Congressional Black Caucus call it unacceptable, arguing it doesn't do enough to address the needs of black Americans.

Borrowers would be eligible for the housing rescue if their mortgage holders were willing to take a substantial loss and allow them to refinance, and if they could show an ability to make payments on the new loan. The bill also would tighten controls and create a new regulator for Fannie Mae and Freddie Mac, the mortgage giants that provide huge amounts of cash flow to the home loan market by buying loans from banks.