The legislation would enable the Federal Housing Administration to offer mortgage guarantees in certain situations in which the lender writes down a portion of the outstanding loan. It also creates an independent regulatory for Fannie Mae and Freddie Mac called the Federal Housing Finance Agency. The bill also calls for the establishment of an affordable housing trust fund.

The bill, "the Federal Housing Finance Regulatory Reform Act of 2008," is going into mark-up this morning, after which it will be presented to the full Senate for a vote."This legislation is good news for both the markets and homeowners," says Dodd in a prepared statement. "The bill addresses the root of our current economic problems--the foreclosure crisis--by creating a voluntary initiative at no estimated cost to taxpayers which will help Americans keep their homes. The bill also establishes a new fund that will help create more affordable housing for millions for Americans."

For his part Shelby noted that the new GSE regulator created under this legislation--the Federal Housing Finance Agency--would be granted enough authority and flexibility to regulate the GSEs. He also emphasized that the affordable housing initiative would not be taxpayer funded.