Key Senators Said to Reach Accord on Housing Bailout

Key members of the U.S. Senate have reached a deal on a sweeping housing rescue plan that would see Fannie Mae and Freddie Mac backstop a government mortgage insurance fund, two industry sources said Thursday.

Sen. Christopher Dodd, chairman of the banking committee, said that a deal had not been finalized.

But the plan outlined by the sources says the two mortgage finance giants would offer the funds to cover the costs of a $300 billion mortgage rescue fund.

Reform legislation for Fannie Mae and Freddie Mac envisioned a housing fund sponsored by the two government-sponsored enterprises and the deal will send those funds to the new mortgage refinance project.

Mortgage Mark Up
Mortgage Mark Up   

Earlier, in an interview on CNBC, Sen. Richard Shelby said a deal was near.

"We're still talking. We're real close, we're this close, but we could be that far away, too," the Republican from Alabama said. "We're trying to put a package together, a meaningful package that both sides can live with. If we're able to do this, we'll move the legislation."

Last week, the House approved legislation that would to create a $300 billion mortgage-insurance fund and provide billions more in homeowner aid to stabilize a housing market shaken by a wave of foreclosures and a credit crunch.

The package sponsored by Democratic Sen. Christopher Dodd of Connecticut would boost government guarantees for failing home loans and create a new regulator for government-sponsored housing finance companies Fannie Mae and Freddie Mac .

Industry sources close to the negotiations over the bill said staff for Dodd and Shelby, the panel's top Republican, had worked into the early morning hours to try to reach a deal, but the sources cautioned that the effort could still fall through.

At the heart of the negotiations are questions about how to pay for a proposed government mortgage guarantee program and how a new regulator should oversee Fannie Mae and Freddie Mac, sources said.

Shelby said he opposes a bailout for irresponsible borrowers.

"We can't bail out everybody, and we shouldn't bail out speculators, we shouldn't bail out people who probably shouldn't have bought a home to begin with and probably won't pay if they're refinanced," he said.

-- Reuters contributed to this report.