The goal is to help strapped borrowers and thaw a credit market plagued by uncertainty about the value of subprime mortgages made to people with spotty credit or low incomes.
As lawmakers return from their two-week spring recess, their leaders are moving fast to increase the political heat on the housing issue. Many Republicans, though, are resisting what they characterize as heavy-handed federal intervention that could leave taxpayers on the hook for a mortgage bailout.
Senate Democrats plan a test vote this coming week on a series of housing proposals. One would let bankruptcy judges reduce the amount owed and interest payments on loans held by distressed borrowers. President Bush and Republicans strongly oppose the idea.
The Senate took up the plan several weeks ago. But the proposal, which also would make grants available to communities with the highest foreclosure rates so they could buy foreclosed properties, fell well short of the 60 votes it would have needed to advance.
Democrats, however, are determined to put Republicans in the position of making tough votes, given the issue's potency for voters.
"Our hope is that when Republican members went back home they said 'Let's do something,"' said Sen. Charles E. Schumer, chairman of the Joint Economic Committee. "We feel the pressure is mounting and we are hopeful that there will be a change of mind in the Republican leadership," said Schumer, D-N.Y.
Bush administration officials have signaled in recent days that they, too, are reviewing a new approach to help homeowners, including people who owe more on their mortgages than their houses are worth. The White House is evaluating the Democratic proposals, but Bush advisers say the administration does not want to reward risky behavior by borrowers, speculators and lenders.
So far, the White House has no timetable for releasing any proposal. Bush is headed to Europe for the NATO summit and will not return until April 6.
In October, the administration helped bring together a private sector group called the HOPE NOW Alliance to streamline the process for refinancing and modifying mortgages. It runs a national hot line to connect struggling homeowners with mortgage counselors. Democrats say that is not enough.
"This is a good start and my administration is committed to building on it," Bush said in his radio address Saturday. "So we're exploring ways this program can help more qualified home buyers. The problems in the housing market are complicated and there is no easy solution. But by supporting responsible homeowners with wise policies, we'll help them weather a difficult period, we will help get our economy back on track."
Democrats plan high-profile hearings scrutinizing the Federal Reserve's recent moves to help Wall Street weather the credit crisis.
The Fed helped broker the 11th-hour sale of a major investment firm, the failing Bear Stearns Cos., to a rival and guaranteed some $30 billion in Bear assets, including questionable mortgage-backed investments. The central bank also allowed investment houses to get emergency loans previously reserved only for commercial banks.
Schumer's committee intends to question Fed Chairman Ben Bernanke on Wednesday. The next day, the Senate Banking, Housing and Urban Affairs Committee has summoned Bernanke, Treasury Secretary Henry Paulson and executives from Bear Stearns and its buyer, JP Morgan Chase & Co.
Democrats will use the test vote and the hearings to pressure Republicans to back their housing initiatives or face charges of hypocrisy for supporting a government rescue for investment giants but not for struggling homeowners.
"If (the Bush administration) can spend all weekend figuring out a way to avoid a problem with Bear Stearns, you can spend a little time to keep people in their homes who were lured into deals ... that were fraudulent and harmful," said Democratic Sen. Christopher Dodd of Connecticut, the banking chairman.
Behind the partisan disputes are several measures that enjoy broad support. They include letting states issue $10 billion in tax-exempt bonds to refinance subprime loans; strengthening loan disclosure rules; and allowing businesses that have suffered losses to reclaim previously paid taxes.
A broader housing overhaul proposed by Dodd and Rep. Barney Frank, chairman of the House Financial Services Committee, faces an uncertain road.
Frank and Dodd want the Federal Housing Administration, the Depression-era agency that insures mortgages, to guarantee $300 billion to $400 billion in refinanced loans to troubled borrowers. Lenders would first have to agree to take a loss on the mortgages; borrowers would have to show they could afford to make payments on the new loans.
The plan would insert the government into the maelstrom of the subprime mortgage mess, with public money at risk should homeowners default. But it would rescue hundreds of thousands of borrowers from foreclosure and insure that lenders get something from their mortgages. That, in turn, could boost investor confidence in the value of mortgage-related investments.
"Some federal money is at risk, but we think we are doing the absolute maximum to protect the government and address the problem," Frank said in an interview. "Unfortunately, the case for doing something gets stronger every day."
Frank said he expects to send the measure through his committee in April. He is optimistic about getting at least some GOP support, especially given the pressures of the political calendar.
"For the Democrats, I don't think you need an election to want to do this, but for the Republicans, it may make a difference, particularly for people from those areas that have been hardest hit," said Frank, who is planning two days of hearings early next month.
Dodd said he wants to add his bill to the housing measure set for a vote Tuesday, but it is up against steep odds.
Bush has been cool to the idea of a big federal housing rescue. "The temptation of Washington is to say that anything short of a massive government intervention in the housing market amounts to inaction," he said recently. "I strongly disagree with that sentiment."
Rep. Tim Walberg, R-Mich., whose state ranks among the top 10 for mortgage foreclosures, according to the research firm RealtyTrac, Inc., said he had high turnout for two foreclosure seminars he held in his district over the break. But he added that Congress should be cautious about federal intervention.
"The bottom line is we don't think the government should get in using taxpayers' dollars to bail a large number of people out for decisions that they made on their own and contracts that they signed," Walberg said.