The dispute dimmed the prospects of a swift deal between Sen.
Christopher J. Dodd, D-Conn., the Banking Committee Chairman, and Sen. Richard C. Shelby of Alabama, the panel's senior Republican.
The two said Thursday that they were near agreement, but a committee session to vote on the measure - originally scheduled for Thursday morning - still had not gotten underway as of late in the afternoon.
"It is my desire that we fashion legislation that will enjoy broad-based support. It may not be possible in the end," Dodd said before announcing the session would be delayed further while negotiations continued. "If it doesn't happen, so be it, but we're not going to have it not happen because we didn't try."
Even as Democrats and Republicans raised concerns about the outlines of the agreement, aides held out hope of a compromise.
"We believe we have an agreement in concept," said Jonathan Graffeo, Shelby's spokesman.
The package would tighten regulation of Fannie Mae and Freddie Mac, the government-sponsored companies that finance mortgages. It would also allow the Federal Housing Administration to back up to $300 billion in new loans for homeowners facing foreclosure, who would otherwise be considered too financially risky to get a fixed-rate, government-insured loan.
And under the tentative agreement with Republicans, a $600 million-per-year affordable housing fund financed by Fannie Mae and Freddie Mac would be partially diverted to cover the projected $1.7 billion cost of the FHA mortgage rescue plan.
But some Democrats are reluctant to go along with tapping money designed to help poor people afford housing to pay for the anti-foreclosure program.
"It's a big problem for Democrats, because we've all been advocating an affordable housing fund for years now," said a senior aide, speaking on condition of anonymity because talks on the measure were ongoing. "We don't want that money to go to the foreclosure (plan). We need money for both."
Affordable housing advocacy groups unleashed a barrage of telephone calls and e-mails on senators Thursday to protest the emerging agreement.
"We will be deeply disappointed if money which has been advocated for and intended for some time to help build housing for extremely low-income people gets diverted away for this foreclosure problem," said Sheila Crowley, president of the National Low Income Housing Coalition. "It would be just a travesty."
Staff aides to Dodd and Shelby, who have been negotiating for weeks in search of an elusive deal, worked overnight Wednesday and were still haggling over details late Thursday.
A major sticking point has been how to insulate taxpayers from risk should homeowners who got government help default on their new mortgages.
President Bush, who has threatened to veto a similar House-passed bill, cites exposing taxpayers to potential losses as a top concern. The White House calls the plan a burdensome bailout.
Under the proposed FHA program, borrowers would have to show they could afford the new loans, while mortgage holders would have to agree to take a substantial loss on the existing loan in exchange for avoiding a costly foreclosure. The FHA would share at least half of any proceeds if the homeowner refinanced again or profited from selling the home.
The Senate developments came as Rep. Barney Frank, D-Mass., the Financial Services chairman who wrote the House bill, signaled that his hopes for a broad housing agreement with the White House were fading.
"I won't tell you I'm optimistic, but I think there's a reasonable chance," Frank told reporters after addressing a Realtors' conference. "We're still trying to keep working together."
Frank told the Realtors they should encourage Senate Republicans to back the homeowner rescue plan, and said Bush's opposition was no excuse for inaction.
"The Constitution says the president gets to veto the bill after we pass it," Frank said, "not that he gets to threaten to veto it so we can all duck a tough issue."
(Copyright 2008 by The Associated Press. All Rights Reserved.) AP-NY-05-15-08 1847EDT
