UPDATE 1-Sen. Clinton calls for subprime mortgage action

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By Kevin Drawbaugh

WASHINGTON, March 15 (Reuters) - Presidential hopeful Hillary Clinton on Thursday called for incentives for U.S. lenders to identify troubled mortgages, offer "a foreclosure timeout" and possibly revise repayment terms amid the widening subprime mortgage crisis.

The New York Democrat also said she will soon reintroduce legislation to modernize the Federal Housing Administration

(FHA), which guarantees mortgages so that low-income home buyers can receive lower interest rates.

Clinton said she favors raising FHA loan limits for high-income areas to help more low-income home buyers.

"I also propose a stop to prepayment penalties designed to trap borrowers," Clinton said in a speech to the National Community Reinvestment Coalition.

At least 20 lenders in the subprime mortgage sector, which serves borrowers with poor credit histories at high interest rates, have gone out of business due to rising default rates and falling home prices.