Fannie, Freddie join Citi, others trying to halt foreclosures

— -- The federal government and one of the country's largest banks are expanding their efforts to help homeowners with troubled mortgages avoid joining the millions of Americans who have already lost their homes to foreclosure.

Both efforts show how the Bush administration and private lenders are scrambling to cope with an unprecedented wave of home foreclosures.

The government is working on a plan to help as many as 3 million homeowners avert foreclosure.

Sheila Bair, the head of the Federal Deposit Insurance Corp. and the government's most vocal advocate for stronger measures to help homeowners, said Tuesday that the Federal Housing Finance Agency program would not do enough to prevent "unnecessary foreclosures."

While the government is investing hundreds of billions of dollars in financial institutions suffering from losses related to bad mortgages, "We must also devote some of that money to fixing the front-end problem: too many unaffordable home loans," Bair said.

Foreclosure filings rose 71% in the third quarter from a year earlier according to RealtyTrac. Home prices continue to fall in many areas, and stricter mortgage standards make it harder for homeowners to sell or refinance. About 4 million borrowers are at least one payment behind, according to the Mortgage Bankers Association.

Some economists say lenders are taking steps on their own to aid homeowners because troubled mortgages remain a financial risk to banks. Also, lenders taking steps now have a chance to establish a record of taking action rather than waiting for a government-imposed mandate.

"The problem has become so great, so everybody is trying to get out and do something. The financial sector understands that unless they get these loans off their books, they'll just be bleeding," says Joel Naroff of Naroff Economic Advisors. "That's good, because if all we do is wait for a government bailout, nobody has the infrastructure to handle the problem."