Home foreclosures in the United States are at their highest levels in 50 years.
Treasury Secretary Henry Paulson is working on a plan with major mortgage companies to help some homeowners. He is expected to layout details of the agreement later this week.
Some economists now estimate that upwards of a million homes could go into foreclosure in 2008 alone.
Many homeowners are running into trouble because the adjustable rates on their sub-prime loans are jumping from 7 percent up to 11 or 12 percent.
Paulson says if homeowners could afford their initial rate, then they're in a better position to get help.
"Those with steady income (who) have relatively clean payment histories — we are focusing on this group," Paulson said. "(We are) determining who they are and what steps may be taken to assist them."
The administration has reportedly been talking to the industry about a plan to freeze the initial rates for some borrowers, though it remains unclear for how many and for how long.
Companies Fear Lawsuits
Politicians and housing advocates have been calling on the industry to modify the terms of unaffordable loans, but many companies that manage these loans have been slow to respond. In part, that's because they've said they have been afraid of lawsuits from investors.
Larry Litton, chief executive officer of Litton Loan Servicing, said the fear at other companies like his is that some of those investors will sue if they think that lowering homeowners' interest rates hurts their return. Litton's company manages 350,000 loans that have been carved up and sold off to investors.
But Litton said, in many cases, avoiding a foreclosure saves both the homeowners' and the investors' money. Litton said he has been modifying a lot of loans — twice as many as the properties he's had to foreclose on.
"I have not heard from any investors saying, 'Hey Larry, I think you're modifying loans and you shouldn't be.' I have not heard that at all, and I think that the secretary and some state leadership that we've gotten are also right on point saying the industry has got to do more here," Litton said.
Litton said the guidelines expected from the Treasury Department on how and when to intervene to help homeowners could coax an increased number of litigation-wary companies to do more.
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