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Compromise bill could expand FHA loan guarantee program

Democrats agree to drop bankruptcy 'cramdowns'

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Plans for a massive expansion of FHA loan guarantee programs got a boost this week when Senate Republicans agreed to include the idea in a compromise bill if Democrats would drop a controversial proposal to allow bankruptcy courts to "cram down" the mortgage debt of troubled borrowers. Tuesday's agreement between Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., could lead to a congressional debate over a $300 billion to $400 billion expansion of Federal Housing Administration loan guarantee programs In the House, Rep. Barney Frank, D-Mass., has proposed authorizing the FHA to help refinance up to 2 million loans in cases where lenders agree to substantial principal write-downs. Sen. Chris Dodd, D-Conn., has put forward a similar plan that could be included in a bipartisan compromise bill expected to be introduced in the Senate today. The Federal Reserve has made billions in loans available to lenders and investment banks that put ...