White House may pledge dollars for homeowners

The Bush administration is finalising a plan to rescue thousands of US homeowners facing foreclosure by helping them refinance into more affordable loans, the Washington Post has reported. The proposal is aimed at assisting borrowers who owe their banks more than their homes are worth due to declining home prices.

If enacted, it would mark the first time that the White House has committed federal dollars to help the most hard-pressed borrowers. Under the plan, the Federal Housing Administration would encourage lenders to forgive a portion of these loans and issue new, smaller loans in exchange for the backing of the US government. The proposal is unlikely to be unveiled before Bush returns from a trip to Europe next week.