Democrats are split on a subprime bailout A House proposal focuses on first-time buyers. A Senate bill would aid builders and banks.

WASHINGTON - Democrats are split over how to respond to the housing debacle, with House leaders focusing on helping homeowners who face foreclosure while the Senate moves to take care of businesses affected by the subprime crisis.

The Senate could pass its bipartisan, business-friendly measure - which showers $25 billion in tax breaks on home builders and banks - as early as today. That's also when a key House panel is to consider a rival Democratic plan that instead steers tax breaks toward first-time home buyers and investors in low-income rental housing.

The emerging rift casts in doubt the prospects for a broader housing-rescue plan that would have the government step in and insure $300 billion in restructured loans for homeowners staring at foreclosure. Rep. Barney Frank (D., Mass.), the House Financial Services Committee chairman, begins hearings on that measure today.

The debate unfolds as Democratic leaders consider using a forthcoming war-spending bill as a vehicle for additional economic aid, such as an extension of jobless benefits and food aid for the poor.

House Speaker Nancy Pelosi (D., Calif.) and Senate Majority Leader Harry Reid (D., Nev.) are calling for a follow-up plan to the stimulus package President Bush signed in February, which included tax rebates for most wage earners.

"We're going to look at the supplemental not only for the war funding, which is about $109 billion, but also what we can do . . . for summer jobs programs, extending unemployment benefits, some things that would be stimulative to the economy," Reid said yesterday.

Pelosi has made little secret of her distaste for the Senate's approach on housing. "Hopefully, the balance will swing to being more in favor of the families who are in danger of losing their homes," she said last week.

The House plan would give first-time buyers a 10 percent credit - up to $7,500 - on the purchase of a new home. It is targeted toward lower earners, with smaller credits to people who make $70,000 (or $110,000 for a couple).

"We need to provide relief to the buyers and families themselves, not just the banks and builders," Rep. Charles B. Rangel (D., N.Y.), the Ways and Means Committee chairman, said yesterday.

Rangel's panel is scheduled to consider the measure today, and House leaders plan to add it to the broader housing overhaul expected to come to a vote in May.

The Senate measure instead proposes a $7,000 tax credit for people who buy foreclosed homes or homes on which foreclosure has been filed. That credit aims to help get foreclosed homes off the market, thereby stabilizing prices and keeping blighted houses from dragging down neighborhoods. However, some economists argue that it could encourage foreclosures and distort the housing market, lowering the value of homes occupied by people who are up to date with their mortgages.

The Senate measure easily cleared a procedural hurdle yesterday, 92-6. Sen. Arlen Specter (R., Pa.) was among the six no votes on the cloture motion; all other Philadelphia-area senators voted yes.

The White House weighed in against the Senate bill Tuesday, opposing provisions to fund state and local government purchases of foreclosed homes and opposing the $7,000 tax credit.

"The bill will likely do more harm than good by bailing out lenders and speculators and passing on costs to other Americans who play by the rules and honor their mortgage-debt obligations," White House press secretary Dana Perino said.

Jim Manley, Reid's spokesman, said those comments "sound like yet another excuse to do nothing to help the thousands of American families facing foreclosure each day."

Both the House and Senate measures would allow people who don't itemize their deductions to claim them on their property taxes, chiefly benefiting homeowners who have paid off their homes and can't claim a deduction on mortgage interest.