U.S. government subprime effort off its pace

By Patrick Rucker

WASHINGTON, Dec 17 (Reuters) - A program unveiled by U.S. President George W. Bush in August that is trying to save tens of thousands of homeowners from foreclosure has aided just 266 borrowers so far, according to government data released on Monday.

The initiative, which helps high-risk or low-income borrowers win better loan terms by insuring mortgage payments, targets recent homeowners whose loans have a built-in interest-rate spike that made them miss a payment.

More than 1.8 million borrowers could face mortgage rate spikes by the end of next year, according to the Federal Reserve Board, with the mortgage costs rising $350 a month.

Until Bush relaxed the rules, borrowers who missed a payment would not have been eligible to refinance under the Federal Housing Administration -- a program from the Depression era designed to make home ownership more affordable.

Officials behind the new initiative, called FHA Secure, said it is on track to move 60,000 delinquent borrowers into stable, fixed-rate home loans.

But between September and mid-December, only 266 such borrowers have cleared all FHA hurdles, according to data compiled by the Department of Housing and Urban Development that was provided to Reuters.

FHA Director Brian Montgomery said the program was off to a slow start but is overcoming bureaucratic challenges and gaining momentum even as the national mortgage crisis worsens.

"Remember, we are flying the plane as we are fixing it," he said.