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U.S. steps up response to housing crisis

The Federal Housing Administration takes a bigger role under most emerging plans.

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Amid reports that potential losses in the US housing crisis could near $1 trillion, Congress, the White House, and even the leading presidential candidates are converging on a strategy to create a federal safety net for hundreds of thousands of families facing the loss of their homes.

At the heart of the emerging consensus is a bigger role for the Federal Housing Administration in helping borrowers refinance loans they cannot afford to pay.

The issue is no longer if but how the Depression-era agency, eclipsed by new financial instruments in the boom years of the housing market, should ramp up fast enough to deal with the millions of homeowners facing foreclosure.

Just weeks ago, key players in the housing issue were settling in for sustained combat over whether government or the market should sort out the crisis. But lawmakers are hearing from voters that government inactivity is no longer an option.

"This is an issue that strikes to the heart of America because of the love Americans have for their homes and the very special place homes hold in our culture," says Allen Sinai, chief global economist at Decision Economic, Inc., who has been advising Democrats on the housing policy. "It's a major reason why we're seeing very encouraging cooperation on this issue."

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