FHA Mortgage Refinance Bill Moves Ahead

The U.S. House Financial Services Committee on Thursday passed a bill that paves the way for the Federal Housing Administration to refinance $300 billion in troubled mortgages.

Lenders would have to erase a portion of the original loan in order to secure a government guarantee on future payments.

The plan would "put liquidity back in the market and not interfere with the market, I think, but help restore (it)," Committee Chairman Barney Frank says.

Democrats, who hold the majority in the House, are expected to pass the measure once it is presented for a vote next week. A Senate panel is to begin drafting a companion measure on Tuesday.

The bill will probably have a harder time in the Republican-dominated Senate.

Source: Reuters News, Patrick Rucker (05/02/2008)