West Hills REAL ESTATE

WASHINGTON — The Bush administration on Wednesday proposed a new effort to help homeowners in danger of foreclosure by loosening the eligibility criteria for new mortgages insured by the federal government. The program seemed designed, at least in part, to pre-empt legislation sought by Congressional Democrats for a much broader expansion of federally insured loans.

The commissioner of the Federal Housing Administration, Brian D. Montgomery, announced the new proposal at a hearing of the House Financial Services Committee. He said the expansion of an existing loan insurance program, called FHA Secure, would help as many as 100,000 additional homeowners by the end of 2008.

Representative Barney Frank, Democrat of Massachusetts and the chairman of the financial services committee, has put forward a more expansive plan that he has said could help as many as 1.5 million troubled borrowers.

Both the plan sought by Democrats and the administration’s plan seek to stabilize the battered housing market by allowing homeowners, many of whom owe more than their homes are now worth, to refinance expensive, adjustable rate mortgages with a more stable and affordable 30-year loan backed by the federal government.

In his testimony, Mr. Montgomery said the housing agency would relax its underwriting rules to allow borrowers who have had up to two late mortgage payments within the last year qualify for a new federally insured loan, at the traditional maximum of 97 percent of the home’s current value. Mr. Montgomery said that applicants with three months of delinquency on their current mortgage would potentially qualify for a loan of up to 90 percent of their home’s value.

Borrowers with F.H.A.-backed loans must also pay insurance premiums to protect the government and taxpayers in the event of defaults. Mr. Montgomery said that the administration plans to change its insurance fees, now charged at a flat rate, to allow more flexible pricing and more expensive premiums for borrowers whose credit scores and other financial history identifies them as a greater risk.

Mr. Montgomery said the administration’s plan “is appropriately tailored to reach homeowners who have demonstrated their commitment to making on-time payments, even during times of financial distress.” He said that the administration would encourage lenders to voluntarily reduce the principal balances of troubled mortgages, a step that would make it easier for owners to refinance. And he said that the administration would allow lenders to maintain a secondary lien on the property, entitling them to a share of future profits should home prices rise.

But Mr. Montgomery criticized the proposal by House Democrats to require such write-downs for homeowners to access the new federally insured loans. “The mandatory write-downs,” he said, “would severely restrict the number of lenders and borrowers who would participate.”

Mr. Frank, who opened Wednesday’s proceedings sarcastically noting the “coincidence” between his hearing and the administration’s announcement, immediately sought to use the new proposal to blunt criticism from Congressional Republicans who just moments earlier had argued against additional government help for troubled borrowers.

The opening statements by lawmakers, as well as the testimony and questioning of witnesses, underscored the philosophical divide between Republicans and Democrats over how to best address the problems in the mortgage and housing markets.

President Bush and other Republicans have urged restraint, saying that government intervention in the markets could cause more harm than good, and they say that taxpayer money should not be put at risk for any programs that could simply provide a bailout to irresponsible or speculative borrowers and reckless lenders. Generally speaking, the Republicans also believe that market forces have a better chance of setting things right than any government program.

Mr. Frank and other Democrats, including House Speaker Nancy Pelosi and the Senate majority leader, Harry Reid of Nevada, have urged more aggressive help for homeowners, suggesting that the wider economy faces even more serious damage if a wave of foreclosures were to occur as some experts are predicting later this year.

Mr. Montgomery, in his testimony, stressed the administration’s aversion to any sort of bailout for speculators. “I want to emphasize that we believe that it is critically important to focus on those homeowners who are working hard to fulfill their obligations,” he said.

Mr. Frank, too, has sought to focus government assistance by making his proposal available only to homeowners seeking to remain in their primary residence.