White House studies home-loan modification plan

WASHINGTON -- The Bush administration is working with industry on a plan to extend lower, introductory interest rates on home loans before they reset at higher levels.

The talks come amid hints from Federal Reserve Chairman Ben Bernanke of another cut in a key interest rate to keep the economy from sliding into a recession.

Treasury Secretary Henry Paulson and other top regulators met Thursday with loan-servicing companies — firms that collect and distribute loan payments — and other industry executives. No formal agreement was announced, but an accord on this issue could be revealed in the next week or two.

"We've all agreed that there should be some sort of standardized approach to reaching more homeowners faster," Treasury Department spokeswoman Jennifer Zuccarelli, who declined to name those at the meeting, said in response to questions.

Among the executives at the meeting were David Lowman, head of JPMorgan Chase's home-lending business, and Michael Held, a division president at Wells Fargo's home mortgage unit, company representatives said.

The meeting was held as part of a Bush administration-organized coalition, called Hope Now, that was organized in October as a response to soaring defaults and foreclosures.

The mortgage industry and federal regulators have been under intense pressure from activists, lawmakers and consumer groups to help borrowers stave off foreclosure, particularly as adjustable-rate mortgages begin to reset, meaning much higher payments.

The Bush administration plan might meet resistance from investors. They have been critical of Sheila Bair, chairman of the Federal Deposit Insurance Corp., who has spent the fall urging mortgage-servicing companies to agree to permanent conversions of adjustable-rate loans to fixed-rate loans.

The change envisioned by Bair would apply only for borrowers who are currently on mortgage payments but unable to afford loans that reset to higher rates. "We need to have long-term sustainable modifications," Bair said at a news conference Wednesday.