Senate lawmakers Friday signed off on a bill that would modernize the Federal Housing Administration and expand FHA loan guarantee programs by $300 billion, create a new regulator for Fannie Mae and Freddie Mac, and create an $8,000 tax credit for first-time home buyers.

HR 3221, the Foreclosure Prevention Act of 2008, would also appropriate $4 billion for states to purchase and renovate abandoned and foreclosed properties, a proposal the Bush administration has threatened to veto.

Senate lawmakers Friday signed off on a bill that would modernize the Federal Housing Administration and expand FHA loan guarantee programs by $300 billion, create a new regulator for Fannie Mae and Freddie Mac, and create an $8,000 tax credit for first-time home buyers.

HR 3221, the Foreclosure Prevention Act of 2008, would also appropriate $4 billion for states to purchase and renovate abandoned and foreclosed properties, a proposal the Bush administration has threatened to veto.

The bill also envisions a national licensing system for residential loan originators and would establish minimum qualifications for all loan originators and require federal regulators to create a registry for banks and thrift employees who originate loans.

The bill is headed back to the House of Representatives, with a plea from Sen. Chris Dodd, D-Conn., not to change the bill without consulting with him and Senate Banking Committee co-chair Richard Shelby, R-Ala.

Before a 63-5 vote to reject two amendments to the bill and send it to the House, Dodd conceded that "it will not solve every problem," but said it addresses criticism that Congress has failed to act quickly to address the housing downturn.

The Bush administration has long sought an independent regulator for Fannie Mae and Freddie Mac, and legislation to modernize practices at FHA. But differences between Republicans and Democrats have scuttled multiple bills on both issues.

By tying several major housing issues into a single bill, Dodd and Shelby hoped to build bipartisan support for the legislation. But differences between the Senate bill and legislation previously adopted in the House must still be ironed out.

While the House wants to continue the temporary limit of $729,750 for loans purchased or guaranteed by Fannie Mae and Freddie Mac, the Senate bill would set a cap of $625,000 for Fannie, Freddie and FHA loan guarantee programs.

The Senate bill envisions covering the nearly $1 billion in expected costs associated with a $300 billion expansion of FHA loan guarantee programs by assessing new fees on loans guaranteed by Fannie and Freddie, a proposal some House lawmakers have been critical of.

But with financial markets roiled by speculation that the government may be forced to bail the giant mortgage companies out, there’s a renewed sense of urgency surrounding the bill’s passage.

"I hope the House and Senate can work quickly with each other to get a bill to the president before Congress adjourns for its August recess," Mortgage Bankers Association Chairman Kieran Quinn said in a statement. "It is unfortunate that it took a crisis of this magnitude to bring us to the point where we can reach broad agreement on these issues, but have no doubt, a more nimble and modern FHA along with stronger … oversight (of Fannie Mae and Freddie Mac) are crucial to addressing the issues that are currently affecting the mortgage and housing markets."

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