U.S. Mulls Plan to Halt Foreclosures: Report

FDIC Chair Sheila Bair is expected to suggest the government give banks a financial incentive to turn troubled loans into more-affordable mortgages, according to a report.
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The Bush administration is considering a roughly $40 billion proposal to help forestall foreclosures, one of a series of ideas under consideration designed to address the

financial crisis

, the

Wall Street Journal

reports.

At a Senate Banking Committee hearing Thursday, Federal Deposit Insurance Corp. Chair Sheila Bair is expected to suggest the government give banks a financial incentive to turn troubled loans into more-affordable mortgages, the newspaper reports, citing a person familiar with her testimony. Under the proposal, the government would share in any future losses on the new loans with lenders.

The

Treasury Department

is discussing this option, the

Journal

reports. It is also moving ahead with separate plans to use part of its $700 billion financial rescue fund to directly buy and renegotiate mortgages.

Treasury officials are slated to privately brief members of the House Financial Services Committee Thursday on their plans to assist homeowners, among other matters.

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Under Bair's idea, new mortgages would have to meet certain conditions to qualify for partial government backing. The list of criteria could not be learned, the newspaper says. Previous government plans have required that owners live in their homes and be relatively up to date on their mortgage payments.

Other possibilities include using mortgage giants

Fannie Mae

(FNM)

and

Freddie Mac

(FRE)

to bring down mortgage rates and insuring inexpensive reworked loans through the Federal Housing Administration, according to the

Journal

.

This article was written by a staff member of TheStreet.com.