The Treasury Department and the FDIC are working on a plan to guarantee the mortgages of 3 million struggling homeowners, the Washington Post reports. Under the plan, lenders would reduce monthly payments so owners could avoid foreclosure. If the homeowners defaulted anyway on the reconfigured loan, the government would repay the lender a portion of the loss.
The plan, expected to cost up to $50 billion, would mark a major expansion in Treasury's role of helping homeowners, the Post notes. While both Treasury and the FDIC are on board, the White House is reportedly balking. The discussions come amid mounting criticism that the government's $700 billion bailout has done wonders for banks but not so much for ordinary Americans.