The Obama administration is hammering out a program to subsidize mortgage payments for troubled homeowners who have gone through a standardized re-appraisal and affordability test, sources familiar with the plan said on Thursday.
The program would be a major break from existing aid programs, which are triggered once homeowners fall into arrears.
Under the plan being contemplated, mortgage companies would use a uniform eligibility test even before a borrower becomes delinquent, sources said.
The administration hopes the mortgage industry will soon agree to a set of standards that will allow it to move quickly to modify many home loans.
Sources said government-controlled housing finance companies Fannie Mae and Freddie Mac would play a supporting role in the government's new plan, but said they are not expected to expand their securitization of loans.
In an interview, James Lockhart, the regulator that oversees Fannie Mae and Freddie Mac, said the mortgage finance industry was eager to have a standardized mortgage modification standard.
"I've talked to all the major servicers -- both the big bank ones and the big independent ones -- and they are all ready to go, they're chomping at the bit," Lockhart, the director of the Federal Housing Finance Agency, said. "The other thing they're asking for standardization."
Under the plan being mulled, homeowners would have to make a case of hardship to qualify for new loan terms.
Housing policymakers weighed but have for now shelved one plan that would have seen the government stand behind low-cost mortgages of between 4 and 4.5 percent, sources said.
Lockhart said that policymakers are eager to prevent a large drop in home values from their current, deflated levels.
"Just as we had a large overshooting to the upside. Is there any way to prevent going much further to the downside? That will cause tremendous harm to the U.S. economy, to the financial system and it's not necessary," he said.