Released: October 30, 2008

Federal government may back revised mortgages

Source: Maura Reynolds and Jim Puzzanghera, L.A.Times (Free Registration)

Federal officials moved closer Wednesday to guaranteeing as much as $500 billion in mortgages after they are modified to make them more affordable to homeowners, part of the multifront battle to resuscitate the country’s flagging economy.

The idea, outlined last week by Federal Deposit Insurance Corp. Chairwoman Sheila C. Bair, is to help millions of families stave off foreclosure by offering loan guarantees and other enhancements to encourage lenders to change the terms of troubled home loans, thus lowering monthly payments.

The FDIC’s plan to stave off the avalanche of foreclosures would be authorized under the $700-billion financial rescue package passed by Congress and would cost the government an estimated $40 billion to $50 billion.

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