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U.S. Senate panel backs Julian Castro for housing secretary

By Elvina Nawaguna

WASHINGTON (Reuters) - A U.S. Senate panel on Wednesday approved San Antonio Mayor Julian Castro to lead the Department of Housing and Urban Development, clearing the way for a final vote in the full Senate.

If confirmed in the post, as expected, Castro would be in position to push the Obama administration's plan to wind down mortgage finance giants Fannie Mae and Freddie Mac, an effort that has stalled in Congress.

The Senate Banking Committee voted 16-6 to place Castro at the helm of the agency in charge of U.S. housing at a time when the market's recovery remains wobbly and still-tight lending terms are making it hard for many Americans to obtain mortgages.

Lawmakers voted generally along party lines, with 12 Democrats and four Republicans voting to approve Castro's nomination and six Republicans opposing it.

A graduate of Stanford University and Harvard Law School, the 39-year-old Castro became the youngest mayor of a major U.S. city when elected in May 2009. He has been praised for his housing and development programs in the Texas city.

At a hearing on his nomination last week, Castro told lawmakers the current U.S. housing finance system was not working well for Americans. He said he would seek to make sure taxpayers would not be on the hook again if another housing crisis struck, as they were when the government stepped in to rescue Freddie Mac and Fannie Mae in 2008.

Castro would replace Shaun Donovan, who was picked to lead the White House budget office. Donovan had worked closely with Senate Democrats on legislation to shutter the two mortgage finance firms and revamp the housing finance system. Castro is expected to pick up the baton and has told lawmakers he would support their reform efforts.

At his nomination hearing, Castro also said he would ensure the Federal Housing Administration, a troubled government mortgage insurer under HUD that was forced to tap $1.7 billion in taxpayer funds last year, would not need another rescue.

As the top U.S. housing official, he would be tasked with making homeownership more affordable for low-income buyers.

The FHA, which aims to help first-time and low-income borrowers, raised its mortgage insurance fees to bolster its finances. That action locked out thousands of potential buyers, and it now faces pressure to bring the fees down.

Castro told lawmakers it was possible to balance FHA's mission of helping low-income borrowers with the need to keep it financially sound.

Castro, who has the backing of industry groups such as the Mortgage Bankers Association and National Association of Realtors, is seen as a rising star in the Democratic Party. Many view him as a potential 2016 vice presidential nominee.

(Reporting by Elvina Nawaguna; Editing by Paul Simao)

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