Key Senators Said to Reach Accord on Housing Bailout, with wire services

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

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.