WASHINGTON - PRESIDENT George W. Bush's administration was set to unveil a major plan on Thursday for averting a wave of further home foreclosures, possibly including a freeze on some interest rates.

The plan was set to be announced amid growing concerns that the slump in housing and rising home loan defaults could tip the US economy into a downturn.

Treasury Secretary Henry Paulson and Housing and Urban Development Secretary Alphonso Jackson scheduled a news conference on Thursday, according to a Treasury statement on Wednesday.

President Bush himself was expected to comment on the plan as well, according to a White House spokesman.

According to The Wall Street Journal, citing sources familiar with the plan, the plan was to include a five-year freeze on monthly payments being increased and 'resets' of some adjustable-rate mortgages.

Mr Paulson also has been working with banks to set up a 'superfund' to buy up distressed mortgage securities hurting the balance sheets of major financial institutions.

Additionally, he said this week he was working 'to convene servicers and investors so they can develop categories of borrowers eligible for appropriate modifications and refinancings, and an industry-wide solution.'

Aid plan
Such a plan could help homeowners on the brink of default to refinance based on a set of benchmarks and standards.

Some say an aid plan is needed to avert a crisis that could displace millions of homeowners and put the entire US economy at risk of recession.

Others warn that an effort to impose new terms on mortgages could send a chill through financial markets and possibly deepen the crisis.

Mr Jeremy Siegel, a University of Pennsylvania economist and advisor to Rittenhouse Asset Management, said such a plan could ease worries about an economic downturn that has been weighing on financial markets.

'I think the only reason for the government to get involved is if there is a coordination problem within the private sector,' he said.

'Lenders would like to negotiate such deals with homeowners, but they are finding it difficult because the claims to the interest payments have been spread so widely through the selling of tranches. This plan could also stave off potentially tougher Congressional measures. In any case, I believe this initiative should be seen as net positive for the markets.'

Bailout
Others said the government should avoid anything that smacks of a bailout of people who took on too much risk.

'When it comes to rescuing the subprime mortgage market, Americans are skeptical not only of who will benefit, but who will be left holding the bag,' said Mr Pete Sepp of the National Taxpayers Union.

'The last time I checked, we lived in a free market world and a capitalist society that was about less government, not more,' said Mr Kevin Geddis, an analyst at Morgan Keegan.

'This is nothing more than a government led bailout that will do nothing but foster more bad behavior in the future.' Mr Yves Smith, a financial professional who writes for the blog Naked Capitalism, said the plan raised many types of concerns because it would be 'a repudiation of contracts.'

'I don't see how any investor with an operating brain cell would ever buy an asset-backed security from a US issuer again, at least one backed by consumer assets,' he said.

Senator Hillary Clinton, a main Democratic presidential candidate, called on Wall Streeton Wednesday to help end the foreclosure crisis in the housing market.

'Wall Street helped create the foreclosure crisis, and Wall Street needs to help us solve it,' she said.

Among the proposals she outlined on Wednesday was to introduce a foreclosure moratorium of at least 90 days on subprime, owner-occupied homes and to freeze the monthly rate on subprime adjustable rate mortgages for at least five years. -- AFP

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