U.S. Lends Hand on ARMs

Not all subprime borrowers would be eligible for a rate freeze. Bush's initiative also makes room for government agencies to play a greater role in assisting borrowers. The FHA will have greater flexibility to offset refinancing to homeowners who have good credit histories but who cannot afford their current mortgage payments, Bush said.

On the regulatory side, the Federal Reserve is working to require stronger lending standards that will help protect borrowers, while the Department of Housing and Urban Development and other banking regulators are also taking steps to improve disclosures on mortgages, President Bush said.

As many as 1.2 million subprime borrowers currently in adjustable-rate mortgages are estimated to be assisted under the overall plan.

Borrowers have been increasingly defaulting on their mortgage payments this year, as the resets began, because the higher rates typically increase mortgage payments by several hundred dollars a month, leaving many homeowners overextended. Foreclosures have also been rising as borrowers are unable to refinance the loans to lower interest rates.

Details of Bush's plan comes the same day the Mortgage Bankers Association released a report saying the delinquency rate for residential mortgage loans stood at 5.59% of all loans outstanding at the end of September -- the highest since 1986. Those loans in the process of foreclosure were another 1.69% of all loans outstanding -- the highest levels ever, it said in its quarterly survey on mortgage delinquencies and foreclosures.

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