Bush to Expand Government Role to Deal With Subprime

By Holly Rosenkrantz
Aug. 31 (Bloomberg) -- President George W. Bush will today announce steps the administration says will help people with subprime mortgages keep their homes.

Bush will let the Federal Housing Administration, which insures mortgages for low- and middle-income borrowers, guarantee loans for delinquent borrowers, allowing them to avoid foreclosure and refinance at more favorable rates, according to an administration official, who spoke on condition of anonymity.

Tighter credit and higher borrowing costs threaten the housing market, which has been an engine of U.S. economic growth. Democrats in Congress and the party's presidential candidates have criticized Bush for not taking action to prevent the spread of foreclosures.

"The Federal Reserve's interest-rate reductions alone can't fix the problem,'' Peter Meister, an economist at BHF Bank AG in Frankfurt, said in a telephone interview. He called the Bush plan "positive'' both for ``the people concerned and the economy as a whole.''