WASHINGTON — Congressional Democrats, seeking to head off a surge in home foreclosures, called Wednesday for steering hundreds of millions of federal dollars to nonprofit groups to help borrowers refinance their loans.
Democrats said they were still working out details of the plan but said their aim was to help borrowers who have not yet entered foreclosure. The federal money would be used to help subsidize their monthly payments or help them spread out payments over a longer time, Sen. Charles E. Schumer (D-N.Y.) said.
Industry experts were cautious in assessing the proposal, saying there were too many unknowns.
"A few hundred million would certainly be a help, but I don't think it would be enough to cover everything," said Rick MacDonald, head of research at Action Economics in Boulder, Colo., which monitors economic indicators.
The Center for Responsible Lending, an advocacy group for borrowers, said it wanted to ensure that any rescue plan was aimed at homeowners and not banks or other mortgage companies that made the loans.
"We support the intention of the efforts to minimize foreclosures for borrowers who are in loans they should never have been in in the first place," said Paul Leonard, director of the group's state office in Oakland.
Mortgage aid is necessary, he said, but a package that sends most of the money to lenders would be "the wrong way to go about it."
As many as 460,000 people in California -- and 2.4 million nationwide -- are at risk of losing their homes because they are unable to make payments or refinance high-cost sub-prime loans they took out between 1998 and 2006, according to the Center for Responsible Lending.
Default notices, the first step toward a foreclosure, soared by 145% in California in the last three months of 2006 compared with the year-earlier period, according to DataQuick Information Systems.
Sub-prime loans are typically made to borrowers with poor credit or without enough income to qualify for cheaper prime loans. Many of these borrowers are at risk of default because they took out loans with low introductory teaser rates, and struggle to pay higher amounts as their payments rise.
At a news conference Wednesday, Schumer said nearly 2 million mortgages would reset to higher rates this year and next. He said his plan was designed to stop these borrowers from losing their homes.
