Oct. 8 (Bloomberg) -- President Barack Obama and congressional leaders might extend or expand tax credits and housing aid as they seek to counter the decline in the U.S. housing market and reverse rising job losses.

House Speaker Nancy Pelosi said lawmakers might extend an $8,000 tax credit for first-time homebuyers that is set to expire Dec. 1.

Senate Banking Committee Chairman Christopher Dodd said he is “hopeful” that lawmakers will allow Fannie Mae, Freddie Mac and the Federal Housing Administration to continue financing larger mortgages past the year’s end.

Extending the tax credit for homebuyers is “under consideration,” Pelosi, a California Democrat, told reporters today in Washington. “The question is, would that be just first-time homeowners or would you open it up to other purchasers of homes?”

“There’s no question that I think it should be extended; for how long, we should discuss,” said House Ways and Means Committee Chairman Charles Rangel, a New York Democrat. He said the tax credit shouldn’t be made permanent.

With the U.S. unemployment rate likely to reach 10 percent by the end of the year, Obama and his advisers are considering a mix of spending programs and tax cuts beyond the stimulus package Congress passed earlier this year. Pelosi and Senate Majority Leader Harry Reid met with Obama yesterday to discuss ways to bolster the economy amid concerns that joblessness will be a drag on the recovery.

Talks With Lawmakers

“We have continued to have conversations with members about initiatives that work for them in their districts to create jobs,” Pelosi said. “We’ll also be hearing from some economists from right to left on the spectrum in the days ahead.”

White House spokesman Robert Gibbs told reporters “an evaluation has been going on for several weeks about measures that are expiring.”

Ways and Means Committee spokesman Matthew Beck said continuing the homebuyer credit would cost the government about $1 billion for each month it is extended.

Republican House Minority Leader John Boehner of Ohio pointed to rising unemployment as evidence that the stimulus failed to produce the promised jobs.

“Now Democrats are doubling down on their flawed economic policies, seeking more stimulus and more government spending when it’s clear that their first bill hasn’t worked,” Boehner told reporters. The result will be tax increases and more borrowing that will add to the federal budget deficit, he said

He called for increased tax deductions for small business and reducing the income tax rate for middle-income earners.

Real-Estate Companies

Treasury Secretary Tim Geithner told reporters on a conference call today that housing markets are showing “broad signs” of improvement even though they haven’t yet healed. Stocks gained in part by Geithner’s remarks.

A gauge of 12 homebuilders surged almost 6.3 percent. Lennar Corp. and D.R. Horton Inc. had the two biggest gains in the S&P 500.

Today, more than 500 companies and trade associations signed a letter urging Congress to extend business tax credits, including one for research and development, which are set to expire at the end of the year.

“Thousands of U.S. businesses and individual taxpayers would face major tax increases if these tax provisions expire,” the letter read. “An extension would bring more certainty in U.S. tax law, foster more effective business decisions and encourage investment.”

Bank of America Corp., IBM Corp., American Apparel Inc., and Norfolk Southern were among the companies signing the letter.

Tax Deductions

Policy makers are weighing proposals including accelerated depreciation tax deductions for companies and extending the loss carry-back deduction from two years to five years. They also are considering extending unemployment insurance benefits.

On housing, Dodd is pushing legislation to allow government home-loan agencies to finance up to $729,750 in high-cost areas. The loan guarantees are set to otherwise fall to $417,000.

“We need to keep this support in place,” said Dodd, a Connecticut Democrat.

Dodd spoke at a hearing focused on the future of Fannie Mae and Freddie Mac, which were seized by regulators last year and are being supported by $400 billion in capital lifelines amid the housing slump. The Obama administration has said the issue can’t be resolved until the market stabilizes.

Loan Limits

Loan limits for Washington-based Fannie Mae, Freddie Mac of McLean, Virginia, and FHA, the U.S. mortgage-insurance agency, were boosted by lawmakers in February 2008 as part of efforts to curb a housing crash that then deepened. Higher limits were then affirmed as part of two other laws passed last year and this year.

Senator Richard Shelby of Alabama, the top Republican on Dodd’s committee, focused on the oversight failings that led to the collapse of Fannie Mae and Freddie Mac and their seizure by the U.S. in September 2008. Not resolving the companies’ status may boost the cost of supporting them, he said.

To contact the reporters on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net; Jody Shenn in New York at jshenn@bloomberg.net.

Last Updated: October 8, 2009 17:06 EDT