WASHINGTON -- The Bush administration yesterday announced another plan to modify what it thinks will be hundreds of thousands of distressed mortgages held or backed by mortgage finance giants Fannie Mae and Freddie Mac.

More than 15 months into a deep, nationwide housing slump, several federal agencies, along with Fannie and Freddie, unveiled what they called a streamlining of modification procedures for delinquent loans. Officials hope that the effort, which begins Dec. 15, will become a standard across the private sector.

		Who will qualify The new plan focuses on loans that Fannie Mae and Freddie Mac, the dominant players in the U.S. mortgage market, own or guarantee. Officials hope the new approach, effective Dec. 15, will become a model for other loan-servicing companies. To qualify, Fannie or Freddie borrowers would have to be at least three months behind on their home loans and owe 90 percent or more than the home is worth. Investors who do not occupy their homes would be excluded, as would borrowers who have filed for bankruptcy. Qualified borrowers would get help in several ways: The interest rate would be reduced, so they would not pay more than 38 percent of gross income on housing expenses. Another option is for loans to be extended to 40 years from 30, and for some of the principal to be deferred, interest-free.

"Troubled borrowers eligible for this program have already experienced significant erosion in their credit scores, making them unlikely to obtain mortgage credit through typical means," said James Lockhart, director of the Federal Housing Finance Agency, which has assumed responsibility for Fannie and Freddie since the Treasury Department seized them in September.

Together, Fannie and Freddie own or back about 58 percent of all U.S. mortgage debt -- about 31 million mortgages -- and they have historically been associated with the nation's decades-long expansion in home ownership.

The new plan is far short of the moratorium on foreclosures sought by President-elect Barack Obama and the Democrats, who next year will have stronger control of Congress. The move follows announcements by private lenders such as Bank of America, J.P. Morgan Chase and, most recently, Citigroup that they would voluntarily rework troubled mortgages.

But the plan announced yesterday reaches only a small number of homeowners whose loans were pooled with others and sold to investors by Fannie and Freddie as bonds called mortgage-backed securities. The effort also would help an even smaller number of loans that Fannie and Freddie haven't packaged and pooled but still retain on their books.

Because Fannie and Freddie were congressionally chartered private companies, they had tighter lending requirements than the Wall Street companies that securitized, or pooled, mortgages for sale to investors. Fannie's foreclosure rate through the end of September was 1.6 percent, versus nearly 20 percent for sub-prime adjustable-rate mortgages packaged and sold by Wall Street firms that have mostly gone bust.

To qualify for the new program, homeowners whose loans are owned or packaged by Fannie and Freddie must be 90 days or more past due on payments for single-family dwellings in which they live. They must prove hardship, can't be in bankruptcy and outstanding loan values must be at least 90 percent of their homes' values.

That's important, since the program targets homeowners who are nearly or completely under water, owing more than their homes are worth in a sinking market. This should help homeowners in Florida, Nevada and the less-expensive inland parts of California that are suffering steep drops in home values.

If the program's thresholds are met, Fannie and Freddie will modify the mortgage with the goal of a monthly payment equal to about 38 percent of the holder's total income.

The goal could be achieved three ways: The loan could be stretched into a 40-year fixed-rate mortgage; the interest rate could be reduced; and/or money going to the mortgage balance, called the principal, could be deferred interest-free until the end of the loan and recaptured in a balloon payment. Fannie and Freddie will pay $800 to financial institutions for each loan they modify.

Officials from the departments of Treasury, Housing and Urban Development and the Federal Housing Finance Agency gave speeches touting the effort. They didn't take questions.

In a subsequent briefing, officials involved in the plan acknowledged that it might reach 200,000 or so homeowners at best next year. That's a fraction of the 2.8 million who are thought to face foreclosure this year. "It's a first step," one official said, acknowledging that the private sector already is taking many of these steps.

Yesterday's plan was patterned after similar efforts by the Federal Deposit Insurance Corp., but it didn't go far enough for FDIC Chairman Sheila C. Bair. "This is a step in the right direction, but falls short of what is needed to achieve wide-scale modifications of distressed mortgages," Ms. Bair, a critic within the Bush administration of its current mortgage-rescue efforts, said in a statement.

"As we lend and invest hundreds of billions of dollars to help institutions suffering leveraged losses from defaulting mortgages, we must also devote some of that money to fixing the front-end problem: too many unaffordable home loans."

Ms Bair's outspoken critiques have won her kudos from Democrats in Congress. Her term as FDIC chairman runs through mid-2011; she has said she would remain in her position if requested by the new president.

Democrats on Capitol Hill aren't satisfied, either. "When the loan is chopped up into a million pieces, and any investor can block a modification from happening, a program like this will only scratch the surface of the mortgage crisis," said Sen. Charles Schumer, D-N.Y.

Fannie Mae on Monday reported a $29 billion loss for the quarter that ended Sept. 30. Its leaders have warned that the current level of government support may not be enough to support its new mission of jump-starting the mortgage market.