Movement may be seen on mortgage aid plan: Rep. Frank

By Svea Herbst-Bayliss and David Lawder

BOSTON/WASHINGTON (Reuters) - An influential Democratic congressman said on Wednesday the Bush administration was willing to discuss a bold plan he proposed to tackle the nation's worsening mortgage foreclosure crisis.

But minutes after U.S. Rep. Barney Frank said the White House indicated a willingness to discuss the possibility of federal backing for hundreds of thousands of home loans, the U.S. Treasury Department denied any deal was in the works.

The back-and-forth between Frank, who chairs the powerful House of Representatives Financial Services Committee, and the White House underlines the political obstacles facing the ambitious plan to guarantee more federal aid in the form of insurance for up to $300 billion in refinanced, affordable-cost mortgages.

"We are now getting some indications that they are ready to talk about it," Frank told Reuters before addressing a town hall meeting in Boston on harmful banking practices.

"Treasury said, 'let's talk'," he said.

Frank said the Treasury officials made the overtures late last week or early this week as a crisis on Wall Street threatened to unhinge the U.S. financial system.

Frank's plan to expand Federal Housing Administration guarantees to ease the strain on Americans at risk of losing their homes has faced stiff political resistance since it was unveiled on March 13. His comment on Wednesday suggested a possible end to the deadlock.

But Treasury spokeswoman Michele Davis fired back that the administration is unwilling to haggle over Frank's plan.

"While we are always willing to listen to the chairman's ideas, we have expressed no interest in negotiating on this proposal," Davis said.

PRIVATE-SECTOR AID

The government has indicated it wants more private aid to resolve a crisis in the property market where home foreclosures and the share of borrowers who face losing their homes hit records in the fourth quarter and look set to climb further.

A senior Treasury official on also on Wednesday said the administration was opposed to housing proposals that would "create new bureaucracies" and those that could raise future borrowing costs by allowing bankruptcy judges to erase mortgage debt.

"These types of proposals will do more harm than good," Treasury assistant secretary for financial markets Anthony Ryan told a business group in Washington. He urged Congress to pass a more modest FHA modernization bill and create a stronger regulator for housing finance giants Fannie Mae, and Freddie Mac which gained a government green light to invest in $200 billion more mortgages this year.

The Treasury is already returning billions of dollars to taxpayers under the government's fiscal stimulus package, trying to tempt them into spending more to stimulate an economy that some experts say is already in recession.

Frank said he already had constructive talks with federal bank regulators including the Federal Reserve.