Senate Democratic and Republican leaders have reached a compromise on a bill to provide tax breaks and refinancing assistance to beleaguered homeowners hit by the mortgage crisis.

The bill provides a new standard property tax deduction of $500 for individual taxpayers and $1,000 for couples. Also included is $10 billion for tax-exempt bonds that local housing authorities can use to refinance sub-prime mortgages and offer new mortgages to first-time homeowners.

On top of that, the bill offers a $7,000 tax credit for purchasers of foreclosed homes and a tax break for struggling homebuilders. Under the bill, the net operating loss carry-back rule would be expanded from two years to four years for 2008 to 2009.

The bill also provides $4 billion in grants that local governments can use to purchase foreclosed properties, plus $100 million to fund counseling for homeowners facing defaults on their mortgages. However, Democrats agreed to drop a provision that would let judges modify the terms of mortgages for borrowers in bankruptcy proceedings.

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