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Senate Democrats and Republicans agree to compromise bill aimed at averting foreclosures and helping those hurt in housing crisis.

NEW YORK (CNNMoney.com) — Senate Democrats and Republicans, under election-year pressure to do more about the mortgage crisis, worked around the clock Wednesday to draft a bipartisan housing bill that has been fast-tracked for a debate and vote.
Some details on the agreement were released Wednesday evening, and the bill may go before the full Senate for discussion Thursday.

The legislation is expected to contain funding to help borrowers avert foreclosures and help boost activity in neighborhoods with vacant properties. It’s also expected to include a business tax break and possibly some measures designed to make loans insured by the Federal Housing Administration more accessible.

“We hope to quickly come to a consensus to move this bill to the floor, consider amendments to it, and pass strong legislation that helps struggling homeowners and our economy as a whole,” Reid and Senate Minority Leader Mitch McConnell, R-Ky., said in a statement.

The bill will be subject to amendment once the Senate begins its debate. “It’s not the end of the road, but it’s a very strong beginning,” said Senate Banking Committee Chairman Christopher Dodd, D-Conn.

Lawmakers in the House - led by Financial Services Committee Barney Frank, D-Mass. - are expected to take up housing measures at hearings next week. Experts say that lawmakers must act swiftly if they hope to prevent a substantial number of foreclosures this year.

Nationwide, 1.5 million subprime adjustable-rate mortgages will reset to higher interest rates this year, and many of those homeowners are at risk of falling behind on their payments.

Below are some of the provisions in the proposed bill, according to a summary released by Dodd’s office.

Modernize the FHA: Measures in the bill would overhaul the Federal Housing Administration’s loan insurance program, which helps homebuyers with weak credit or little cash get an affordable mortgage.

The changes proposed in the bipartisan bill would raise the FHA loan limits from 95% of an area’s median home price to 110%. But in high-cost areas, the FHA loan limit may not exceed $550,000.

And the bill will recommend that FHA loan down payment requirements be raised to 3.5% from 3%. That’s a major reversal from the change proposed in an FHA modernization bill passed by the Senate, which had called for the down payment requirement to be reduced to 1.5%.

Help for troubled borrowers trying to refinance: The bill would let states offer $10 billion in tax-free municipal bonds, the proceeds from which would be used to subsidize mortgage refinancing for subprime borrowers trying to get out of unaffordable loans.

Under current law, state and local housing agencies are allowed to issue tax-free bonds only to help subsidize mortgages for first-time homebuyers or those purchasing property in distressed areas.

Tax credits for buying troubled properties: The bill would create a tax credit of $7,000 for homebuyers who buy foreclosed homes or homes where the current owner is in default.

New property tax deduction: For the 28.3 million homeowners who take the standard deduction on their federal tax return, the bill would allow them to take a second standard deduction for the property tax they pay. The new standard property tax deduction will be $500 for single filers and $1,000 for couples filing jointly.

Currently only homeowners who itemize their deductions can deduct their property taxes.

Bigger tax break for homebuilders: The bill would expand the so-called net operating loss carryback. The provision would extend to four years from two the time a company may apply its 2008 and 2009 losses to past tax bills.

Homebuilders who enjoyed a profit surge during the housing boom would be able to offset those profits with their losses due to the downturn. The thinking is that the break could help homebuilders preserve jobs and stay in business.

Money to aid areas hit by foreclosures: The bill would allow $4 billion in grants to state and local governments to buy and rehabilitate foreclosed homes. The White House has said, however, it considers such a provision a bailout for lenders and speculators.

More money for consumer counseling: The bill will call for an additional $100 million for housing counselors working with homeowners at risk of foreclosure.

Greater transparency for borrowers: The bill might call for greater disclosure in the mortgage application process so consumers could more easily understand the terms of their loans and won’t be surprised by big payment increases.

– CNN congressional producer Ted Barrett contributed to this report.

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