US Treasury Secretary Henry Paulson said yesterday he hoped to have a mortgage relief plan ready by the end of the week and urged Congress to give local governments more borrowing power to ward off foreclosures.
The Bush administration is seeking agreement with the mortgage industry to freeze interest rates on sub-prime loans whose rates are about to reset sharply highly in the hope that many of these borrowers can stay in their homes.
In addition, the administration is pressing Congress to take others steps it argues would ease strains in the US housing market.
Paulson has been pushing Congress on other measures, including modernising the Federal Housing Administration and government-sponsored enterprises like Freddie Mac and Fannie Mae that play key roles in keeping the flow of mortgage funds going.
In the past week, Paulson has met US lending regulators and executives from several sectors of the mortgage industry to develop a plan to help sub-prime borrowers - people with spotty credit records who were able to get mortgage loans during the boom years of the 1990s and early 2000s but now face a squeeze.
Paulson said 'some penalty' will be paid by the US economy because of the damage that has been caused in housing markets, where home prices have fallen and inventories of unsold homes have piled up and put a further brake on construction and sales.
More than two million sub-prime borrowers are estimated to be facing higher mortgage costs and the possible loss of their homes if they cannot meet new, higher payments that will come into effect when their mortgages reset at higher rates.
Mounting mortgage foreclosures have spooked financial markets around the globe in recent months. Many sinking loans were repackaged as securities and sold to investors around the world, who now are scrambling to get a handle on the value of their assets.
