WASHINGTON - The government is considering a plan that would help about 3-million homeowners avoid foreclosure, sources briefed on the matter said.
A final deal had not been reached as of Wednesday afternoon and negotiations could still fall apart, but government agencies were contemplating using about $50-billion from the recently passed bailout of the financial industry to guarantee about $500-billion in mortgages.
The plan could include loan modifications that would lower interest rates for a five-year period, according to two people briefed on the plan, who asked not to be identified because details were still being worked out and the plan was not yet public.
The plan would be the most aggressive effort yet to limit damages from the U.S. housing recession, which has shaken global credit markets.
More than 4-million American homeowners with a mortgage were at least one payment behind on their loans at the end of June, and 500,000 had started the foreclosure process, according to the most recent data from the Mortgage Bankers Association.
The government's program would be run by the Federal Deposit Insurance Corp. The agency's chairman, Sheila Bair, said last week she was working "closely and creatively" with the Treasury Department on such a plan, but revealed few details.
The plan was scheduled to be announced Wednesday but was pushed back because the details were still being finalized.
Andrew Gray, an FDIC spokesman, said it would be "premature to speculate about any final framework or parameters of a potential program."
Treasury Department spokeswoman Jennifer Zuccarelli said the Bush administration "is looking at ways to reduce foreclosures, and that process is ongoing," but has not decided on a final approach.
On Wednesday, about 100 demonstrators marched in front of the headquarters of Fannie Mae and forced a midafternoon meeting with the company's chief executive, Herbert Allison.
In the past 10 weeks, Fannie Mae says it has received more than 40,000 defaulting loans and stopped 80 percent of them from going into foreclosure.