WASHINGTON -- The White House's new point man on housing said Wednesday he was "very optimistic" the Bush administration and lawmakers could reach an agreement on a huge package to backstop the flailing mortgage market.

"Something can be worked out," U.S. Housing and Urban Development Secretary Steve Preston said in his first interview since taking over the agency this month. "I don't know if it will be, but something can be worked out."

Mr. Preston's comments on housing are significant because the White House has threatened to veto sweeping legislation to address the housing crisis. Legislation is pending in the Senate. The House passed a separate bill in May.

Both bills would allow hundreds of thousands of qualified homeowners to refinance into affordable, government-insured mortgages. The bills would overhaul supervision of Fannie Mae and Freddie Mac and give HUD more flexibility to operate its mortgage-insurance division, known as the Federal Housing Administration.

Senate Democrats Wednesday were trying to resolve procedural fights before they could pass their version of the legislation, with Senate Banking Committee Chairman Christopher Dodd (D., Conn.) blasting Republicans for delaying a final vote on the measure. Democrats had hoped to pass the measure this week, but a final vote appeared likely to slip until after the July 4 recess. Still, the legislation is expected to pass easily, potentially with enough votes to overturn a veto.

The Bush administration has wavered on the bill, praising provisions to boost supervision of Fannie Mae and Freddie Mac but raising concerns about some of the new spending, such as $4 billion in grants for localities to buy foreclosed property.

White House spokeswoman Dana Perino said Wednesday the White House was "nearer to having something we could work on."

Mr. Preston characterized the policy discussions as "a turning point in the history of our mortgage markets, and what government's role should be, and how we are going to enable governmental institutions to fulfill that role."

The roles of Fannie Mae, Freddie Mac and FHA have surged in recent months as homeowners have looked to government-backed programs for more funding. Previous sources of funding for mortgages, notably the market for certain securitized loans, have dried up in recent months amid a broader credit crunch.

One provision of the Senate bill that Mr. Preston said still concerns the Bush administration is the possibility that it could prevent HUD from charging different premiums to homeowners based on the amount of risk the homeowners pose to HUD's insurance program. Mr. Preston said this could prevent some homeowners from qualifying for FHA insurance and could require fees for all homeowners to increase. Some Democrats have countered that allowing risk-based pricing could penalize financially strapped lower-income borrowers.

Mr. Preston said he was hopeful these issues could be settled.

Looking ahead, House and Senate lawmakers have ramped up negotiations to resolve their differences. Sen. Dodd and Sen. Jack Reed (D., R.I.) met Tuesday afternoon with House Financial Services Committee Chairman Barney Frank to go over differences in the bills, though details of their talks were kept private.

Separately, Mr. Preston said he has ordered an internal review of the way the agency awards contracts, an issue that dogged his predecessor, Alphonso Jackson, amid allegations that contracts were improperly awarded. Mr. Jackson has denied wrongdoing. At his recent Senate confirmation hearing, Mr. Preston said he would report back to the Senate Banking Committee on the results of his internal inquiry.

--Michael R. Crittenden contributed to this article.

Write to Damian Paletta at damian.paletta@wsj.com

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