Government, banks agree on plan to counter foreclosures

Business Materials 12 February 2008 21:56 (UTC +04:00)

( dpa ) - The Bush administration announced Tuesday a new initiative worked out with banks to help borrowers avoid foreclosing on their home loans.

The plan places an immediate 30-day suspension on foreclosure proceedings against homeowners who have been unable to make their mortgage payments, US Treasury Secretary Henry Paulson said.

Banks will also contact households more than 90 days delinquent on their payments to explore ways to readjust their loans in order to keep them in their homes, Paulson said.

The initiative is the latest by the administration of President George W Bush to rescue an economy that has been slowing largely because of the crisis in the housing market, as well as high energy costs and an uptick in the unemployment rate.

The housing market crisis was caused when banks issued loans with variable interest rates to buyers with weak credit. When interest rates climbed, they were unable to keep up on their payments, prompting widespread loan defaults and record losses for banks.

The plan was agreed to by the six largest US lenders.