by Calculated Risk on 10/29/2008 03:49:00 PM

From the WaPo: Treasury, FDIC Crafting Plan to Rework Millions of Mortgages

Officials with the Treasury and the Federal Deposit Insurance Corp. are crafting a plan under which the government would guarantee the mortgages of as many as 3 million homeowners now struggling to avoid foreclosure ...

Under the program being discussed, the lender would agree to reduce borrowers’ monthly payments, for example by lowering the interest rate or principal of a mortgage loan, based on the homeowner’s ability to pay. ... the government would then guarantee to repay the lender for a portion of its loss if the borrower defaulted on the reconfigured loan.