The chairman of the House Financial Services Committee is considering legislation to create new conditions for the Treasury Department in spending the next $350 billion in funding for the Troubled Asset Relief Program (TARP), which the Obama Administration will take over when the president-elect assumes office on Jan. 20, congressional and industry sources close to the process say.

Among other things, the legislation is likely to include specific instructions to assist homeowners facing foreclosure; more specific mandates on executive compensation for firms that receive government TARP funding, and at least tougher disclosure requirements on how TARP money is used by firms--particularly whether or not it is being used for new lending, as many lawmakers demand--the sources said.

“I think we're all outraged that Merrill Lynch gets billions of dollars and then one of their executives goes out, after being with them three weeks, and buys a $27 million apartment on Park Avenue,” House Democratic leader Steny Hoyer, (D-MD), told FOX News Sunday. “We need to make sure that we have appropriate constraints in any money that is authorized under the second tranche of the TARP.”

Sources said Rep. Barney Frank, (D-MA), the committee chairman, could introduce new TARP legislation as early as Friday, though Frank on Monday postponed a hearing on “priorities for the next administration (on) use of TARP funds” that was scheduled for this week.

While Democrats and President-elect Obama appear to be “on the same page” with limits on executive compensation and additional assistance for struggling homeowners, among other economic issues, “there are pages -- and there are pages,” one House staff member said.

“It’s that proverbial ‘the devil is in the details',” said Karen Petrou, managing partner of Federal Financial Analytics, a Washington research firm. “The Democratic leadership and the Obama incoming administration agree in general principal on issues like foreclosure avoidance. But how to do that – there are many different approaches to that. And by dropping legislation – if not necessarily moving to pass it, but by introducing it – it’s a formal ‘heads up’ to the Obama Administration on what Congress would like, and indeed how (Congress) might move forward” if the president-elect takes a different course on the next phase of TARP.

Many House Republicans, as well as members of both parties in the Senate, also favor tougher conditions in the next TARP phase. Since Congress approved the TARP legislation in October, members have expressed increasing frustration with the Bush Administration’s management of the TARP and enforcement of key provisions.

“People are angry on both sides,” Petrou said. “It’s going to be one of those (things) in a partisan year where Democrats and Republicans agree on one thing – that they don’t like what the TARP has been used for.”

Among possible areas of conflict between Congressional Democrats and the president-elect, Frank has supported funding a proposal by the chairman of the Federal Deposit Insurance Corporation, Sheila Bair, to use government loan guarantees authorized in the TARP to encourage banks, investment funds and other holders of residential mortgages to restructure subprime and other non-traditional mortgages for homeowners facing foreclosure. The FDIC plan would -- for a period -- reimburse them up to 50% of the losses on a restructured mortgage if, after the holder makes it more affordable by lowering the interest rate, reducing the principal or adopting other better terms, the homeowner still defaults. The FDIC says the plan could help up to 1.5 million homeowners avoid foreclosure, but could cost the government more than $24 billion.

In his new TARP legislation, sources expect Frank to include possible directions to the Treasury to support the FDIC’s proposal -- or a version of it -- in the next phase of TARP. But while Mr. Obama favors additional government measures to help troubled homeowners, he has not specifically endorsed the FDIC plan.

“One of the things Congress has been the most upset (about), particularly the Democrats have been the most upset about, is that while the law dictated action to prevent foreclosures, Treasury has done nothing regarding it,’ Petrou said. “It’s addressed foreclosures to some degree in other programs outside of the TARP, but it hasn’t acted on the express authority in the law, the express mandate in the law, relating to mortgage foreclosures.”

Petrou said that on other issues in TARP such as executive compensation and corporate governance, provisions in a new TARP bill could be retroactive. Financial firms that received TARP funds but that don’t like the new conditions could then decide to repay the TARP funds to Treasury if they are able, she said.

In October, Congress authorized $700 billion for Treasury’s use under the TARP. The Bush Administration has spent or committed the first $350 billion—slightly more, in fact. To access the next $350 billion, President Bush – or President Obama – must submit a report to Congress outlining plans for spending it. Congress then would have 15 days to approve a resolution to deny the additional funding, though the president could veto the resolution – a veto that both chambers would then have to override by a two-thirds vote.

A spokesperson for Frank said that in hearings and public statements, the chairman has made clear his positions on the management of the next $350 billion of TARP funds. She would not comment on whether Frank is preparing new TARP legislation, though she acknowledged committee staff “has been working” on TARP issues the chairman is concerned about.

An aide to Sen. Christopher Dodd (D-CN), chairman of the Senate Banking Committee, said Dodd is concerned about executive compensation, mortgage foreclosures and lending issues under TARP. But the aide would not say if Dodd is working on new legislation with Frank or if he would support any.

A White House spokesman said the administration has made no decisions yet on whether to seek the second tranche of TARP funding.