WASHINGTON — Seeking to gird the nation's economy against a potential tidal wave of foreclosures, the Bush administration will release a plan today that is expected to block many mortgages from adjusting to higher rates for as long as five years.
Administration officials acknowledged privately Wednesday that the plan was likely to face objections from low-income borrowers who won't be helped, and from investors who backed now-troubled sub-prime home loans that are at the heart of the mortgage crisis.
But they said the goal was to keep rising foreclosures from tilting the economy toward recession, and that helping specific groups was a secondary objective.
"Foreclosure prevention is the goal," said one official, who spoke on condition of anonymity because the plan had not yet been announced. "There are going to be questions, for sure, no matter how it's done."
The five-year freeze will be offered to borrowers who live in their homes, are current on their mortgage payments, have accrued at least some equity in their homes and whose income indicates they cannot afford higher payments.
In addition to freezing some mortgages that would otherwise begin to carry much higher interest rates and monthly payments, the voluntary plan will call for speeding up the process of bringing lenders together with low-income homeowners to renegotiate mortgages on terms that the borrowers can afford.
Such deals mean lenders would get less than the sharply higher rates called for in the original adjustable-rate loans, but more than many would get through foreclosure.
Just which borrowers get help could become a sticking point, however.
As talk of a rate freeze gathered traction in recent weeks, some complained that lenders would be bailing out people who knowingly took out bigger loans than they could afford in hopes of reaping windfall profits as home values soared.
Some members of Congress have made clear to the administration that the plan needs to exclude real estate speculators.
"We strongly support steps by lenders to help those Americans facing foreclosure to restructure their loans and keep their homes," four House members -- two Democrats and two Republicans -- wrote in a letter to John G. Stumpf, chief executive of Wells Fargo & Co.
"However," they were quick to add, "it should be noted that our call for assistance does not include those involved in fraudulent behavior, illegal immigrants, or so-called 'flippers,' who own investment properties that are not primary residences."
