Legislators ponder next move on housing

WASHINGTON, March 20 (UPI) -- Washington lawmakers are looking for answers to help troubled homeowners now that the U.S. Federal Reserve has moved to help troubled banks.

Democrats favor a proposal from finance committee leader U.S. Rep. Barney Frank, D-Mass. and U.S. Senate Housing committee Chairman U.S. Sen. Christopher Dodd, D-Conn., The Washington Post reported Thursday.

The proposal calls for the Federal Housing Administration to determine the value of a home and the home owner's ability to pay. Payoffs on the new loan, which would be insured by the FHA, would be capped at 85 percent of the home's value.

Lawmakers have also proposed extending warning periods on mortgage rate increases and reducing down payment requirements for FHA loans from 3 percent to 1.5 percent or even -- in the U.S. House of Representatives' version -- to zero.

However, "we have not seen any new ideas … that we're willing to support," White House spokesman Tony Fratto said.

But U.S.Treasury Secretary Henry Paulson is pushing for action and observers say a compromise is probable.

"There's real fear about where this crisis is going to end up," Francis Creighton, a lobbyist for the Mortgage Bankers Association, told the Post.

"This administration appears to be ready to do what it needs to address this crisis," he said.