Sweeping mortgage bailout unlikely

Borrowers, don't hold your breath for a bailout.

As mortgage delinquencies soar, many consumer advocates and political leaders are calling on government to help what may ultimately be millions of homeowners facing foreclosure.

But the modest federal and state aid proposals advanced so far suggest that most people struggling with onerous loan payments are unlikely to get government assistance.

The Bush administration has ruled out a blanket program to help homeowners stave off foreclosure, reasoning that it's "not an appropriate role for the federal government," White House spokesman Tony Fratto said.

And at the state level, "there is only a limited amount we can do for people who are affected right now," said Assemblyman Ted Lieu (D-Torrance), chairman of the Assembly Banking Committee.

By one estimate, as many as 460,000 people in California -- and 2.4 million nationwide -- could lose their homes because they are unable to make payments on high-cost sub-prime loans or to refinance them to more favorable terms.

The threat of a foreclosure wave, and government's limited ability or willingness to respond, could put added pressure on lenders to renegotiate loans that might otherwise end in failure.

Some of the country's largest mortgage lenders -- including Countrywide Financial Corp. and Wells Fargo & Co. -- met with Lieu this week to discuss a private effort to keep at least some foundering California borrowers in their homes, participants in the meeting said Thursday.

"We discussed a potential billion-dollar, privately financed bailout to prevent foreclosures," said Robert Gnaizda of the Greenlining Institute, a fair-lending advocate. He said the plan would provide relief to a select group, including the elderly and families of modest means with minor children.

No commitments were made, however. A Wells Fargo spokeswoman said the bank had previously discussed the possibility of a private assistance fund with Gnaizda, but had heard too few details to be able to say whether such a plan might work. A Countrywide spokesman declined to comment.

Sub-prime loans, often with adjustable rates, made homeownership possible for millions of Americans whose credit ratings or income levels made them ineligible for cheaper prime loans. But many of these borrowers now find they can't make their escalating payments, leading to a surge in defaults and foreclosures.

Pushing for help