Bush administration announces mortgage help expansion; Democrats push broader housing rescue

WASHINGTON — The Bush administration is expanding a government program to help homeowners head off foreclosure as it scrambles to counter Democratic calls for a broader federal housing rescue.

The plan would enable more low- to moderate-income homeowners to refinance into mortgages with monthly payments they can afford, while lenders would take a loss on the loans.

It is a more modest version of a concept Democrats have been pushing in recent days to respond to the mortgage mess, which would have the Federal Housing Administration back restructured loans for distressed borrowers. The administration's idea, however, would reach far fewer borrowers than the Democrats' proposal and would be financed by homeowners' mortgage insurance premiums rather than taxpayer dollars.

The plan would expand a program, known as FHASecure, that Democrats have argued has done too little for struggling homeowners and doesn't reach the vast majority of distressed borrowers.

"We believe that the reach of this program can and should be extended in a responsible way," FHA Commissioner Brian Montgomery said in testimony prepared for a House Financial Services hearing Wednesday on the housing crisis.

FHA Secure has already helped out nearly 150,000 borrowers, and with the expansion it expects to help a total of about 500,000 homeowners by the end of the year, said White House Press Secretary Dana Perino.

"The expansion will allow the program to insure loans for Americans who may have been late with a couple of payments and are facing interest rate resets, but who are otherwise reliably creditworthy — verifiable income, decent credit histories and they live in their homes," Perino said.

She said the proposal "is not a silver bullet that will solve all the problems in housing, but it will help some additional people stay in their homes and that's something the president wants to see."

In his statement, Montgomery raised serious concerns about a broader proposal drafted by Rep. Barney Frank, D-Mass., the Financial Services Committee chairman, that would have the FHA insure up to $300 billion in restructured loans for homeowners facing foreclosure.

He said the measure was an overly rigid approach that would put the government at inappropriate risk and allow the agency to insure excessively risky borrowers.

The Senate, meanwhile, is working to quickly pass a grab bag of measures aimed at helping homeowners and businesses weather the housing crisis.