OUTLOOK: CONGRESS SET TO CLEAR HOUSING BILL

Congress this week appears slated to clear the biggest housing
package in a generation, a measure that would provide help for at-risk
subprime borrowers, place a tough new regulator in charge of Fannie Mae
and Freddie Mac, create an affordable housing trust fund and provide tax
breaks to spur homebuying.

The package was placed on the fast-track when Treasury Secretary
Paulson last week asked lawmakers to include a plan to help Fannie and
Freddie, whose stock plummeted over fears they are undercapitalized.

The proposal would provide a temporary increase for the line of
credit the two have with Treasury and allow the department to purchase
equity in the two and grant the Federal Reserve new powers so it can
consult their regulator on setting capital standards for Fannie and
Freddie. Lawmakers are expected to place restrictions on the plan to
limit taxpayer liability.

In exchange for inclusion of the plan, House Democrats demanded
that about $4 billion in Community Development Block Grant funding for
communities to buy and rehabilitate foreclosed homes be attached,
despite a White House veto threat over the provision.

House Speaker Pelosi last week predicted the president would not
veto the package with the block grant funding in the face of Fannie's
and Freddie's troubles.

The House is slated to vote Wednesday on the package, which
includes a revamp of the oversight at Fannie, Freddie and the Federal
Home Loan Bank System; an overhaul of the Federal Housing
Administration's mortgage insurance program, and allow the FHA to
guarantee up to $300 billion in new loans for at-risk subprime
borrowers.

It also would siphon some of Fannie's and Freddie's new business
to create an affordable-housing trust fund, providing about $500 million
annually to low-income residents.

The Senate is expected to take up the measure and clear it by
the end of the week.