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Senate considers $300 billion FHA expansion plan

Dodd bringing bill to Senate Banking Committee

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The fate of a plan to authorize the Federal Housing Administration to guarantee up to $300 billion in loans to help troubled borrowers refinance into more affordable mortgages could be decided Thursday by members of the Senate Banking Committee. Committee Chairman Chris Dodd, D-Conn., has included his version of the FHA expansion approved by the House last week in his own bill, "The Federal Housing Finance Regulatory Reform Act of 2008." Although Dodd's plan differs in some details from the House proposal -- first put forward in March by Rep. Barney Frank, D-Mass. -- both programs would allow the government to guarantee refinance loans only when lenders agree to write down some of an existing mortgage's principal. To prevent house flipping, borrowers would be charged exit fees if they sold or refinanced their home within five years. While Frank hopes the plan could help up to 2 million borrowers, the Congressional Budget Office estimates that about 500,000 borro...