J. Scott Applewhite / AP Rep. Barney Frank says mortgage servicers must be willing to accept some losses.

WASHINGTON — Congressional Democrats and President Bush will agree on a bill to help half a million or more struggling homeowners get into lower cost mortgages, but it won't be through the bankruptcy courts, the chairman of the House Financial Services Committee said Tuesday.

Efforts to let bankruptcy judges rewrite mortgages for strapped borrowers won't make it through Congress this year, Rep. Barney Frank, D-Mass., said in an interview. But if the mortgage industry refuses to participate in his plan to let such borrowers refinance into government-backed loans, Frank said, they can expect tougher regulation in the future.

"If they're an obstacle to this, there's going to be a serious effort legislatively to reduce their role," said Frank, who plans to meet with mortgage servicers on Wednesday.

Servicers will have to take losses on distressed loans "whether they like it or not," he said.

The darkening economic picture and the political calendar are giving lawmakers and the White House a powerful incentive to come together on a housing package, Frank said.

Republicans and the Bush administration are increasingly open to Democrats' calls for a housing rescue package as they prepare to face voters in November, despite lingering concerns about embracing what some call a government bailout that would put taxpayer dollars at risk.

"It would be very nice if we didn't have to do this at all," Frank said. "Some people who made irresponsible decisions to borrow more than they should have are going to be helped by this. The alternative is to do nothing and have greater damage to neighborhoods (and) the economy."

"People are very afraid of being accused of not having done something to avoid (a) longer and deeper recession," he added.

Frank's package, scheduled for a committee vote next week, would allow the Federal Housing Administration to back as much as $300 billion in mortgages for struggling homeowners.

Servicers would have to agree to take a loss on the existing loans, while borrowers would have to show they could afford to make new payments on their refinanced mortgages. In the Senate, Sen. Christopher J. Dodd, D-Conn., the Banking Committee chairman, is working on a similar measure.

The final bill could include long-awaited revamps of the FHA, the Depression-era mortgage insurer, and Fannie Mae and Freddie Mac, the government-sponsored loan financiers and guarantors.

A broader effort to impose stricter financial regulation on investment banks and other institutions will wait until next year, Frank said.

Liberal groups and consumer advocates contend the bankruptcy change — supported by both Democratic presidential candidates, Hillary Rodham Clinton and Barack Obama — is needed to help hundreds of thousands of homeowners avoid foreclosure. Critics say it would hurt borrowers in the long term by prompting lenders to raise interest rates.

The Senate rejected the measure before passing a housing bill last week, and Frank said it had little chance of being resurrected in the House.

"If we do do it, I think it's not going anywhere," Frank said.

To encourage lenders to participate voluntarily, Frank said, he is working with the Fed on a way, perhaps through arbitration, for servicers to settle disputes with people or companies that have secondary claims on a home and might otherwise seek to block the refinance.

His measure is also likely to be married with a measure by Reps. Paul E. Kanjorski, D-Pa., and Michael N. Castle, R-Del., that would shield "securitizers" — those who bundle mortgages into securities that are sold to investors — from liability when a servicer agrees to take a loss on a mortgage as part of the new FHA program.