Bush to outline 5-year rate freeze plan: sources

By Patrick Rucker and John Poirier

WASHINGTON (Reuters) - President George W. Bush is expected to outline on Thursday a plan to freeze mortgage rates for five years for many U.S. homeowners facing sharp increases in their monthly payments, industry sources said on Wednesday.

Final details of the plan are still being worked out after a trade group that represents large mortgage investors presented its framework for implementing a broad rate freeze to the Treasury Department late on Tuesday, the sources said.

"The president will make a statement on housing issues tomorrow afternoon," a senior administration official said, declining to elaborate on details.

The sources, who are familiar with details of the trade group's pitch, said the plan envisions covering subprime loans taken out between January 1, 2005, through the end of this past July, with rates that are due to reset over the coming 2-1/2 years.

An estimated 1.8 million U.S. homeowners who took out loans with low teaser rates face pricey loan resets next year alone, the Federal Reserve has said. Officials fear half a million borrowers risk losing their homes.

Treasury Secretary Henry Paulson has worked closely with the investor trade group - the American Securitization Forum - as well as mortgage servicers and lenders to hammer out a comprehensive plan to modify troubled loans.

On Wednesday morning, Paulson outlined to a closed-door meeting of Republican lawmakers his efforts to broker a rescue plan for troubled borrowers.

"It was all broad-picture," said Ed Royce, a California lawmaker who sits on the House Financial Services Committee and who attended the briefing. "He was upbeat about the way those negotiations are going."