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WASHINGTON — The federal government is working on a plan that could help many distressed homeowners escape foreclosure.

The plan may follow a method already in use by the Federal Deposit Insurance Corp. that is helping some mortgage borrowers save money and their houses.

Officials from the FDIC and the Treasury Department told Congress Thursday that both agencies are working to prevent foreclosures.

"We are passionate about doing everything we can to avoid preventable foreclosures," Neel Kashkari, the assistant secretary of the Treasury who is overseeing the government’s $700 billion financial rescue effort, told the Senate Banking Committee.

Sheila Bair, chairwoman of the FDIC, told the same Senate panel that the government needs to do more to help tens of thousands of borrowers avert foreclosure, including setting standards for modifying mortgages into more affordable loans and providing loan guarantees to banks and other mortgage services that meet them.

"Loan guarantees could be used as an incentive for servicers to modify loans," Bair said. "By doing so, unaffordable loans could be converted into loans that are sustainable over the long term."

The homeowner assistance plan could follow a model being used by California’s IndyMac Federal Bank, which is operating under FDIC receivership.

About 4,000 IndyMac borrowers have had their mortgage loan terms modified, lowering their monthly payments. By this weekend, the bank expected to have sent out more than 15,000 additional modification offers to borrowers that are expected to lower the monthly mortgage payments by $430 a month on average.

IndyMac’s efforts, which also are designed to save the FDIC money by curbing losses on foreclosed houses, are being closely watched nevada payday loans. Bank of America Corp. is taking a similar approach with newly acquired Countrywide Financial Corp. as part of an $8.4 billion, 12-state legal settlement reached this month.

With house prices off 18 percent nationally from their peak in mid-2006, aggressive loan modifications now make more financial sense for lenders, said Steve Bailey, a former Countrywide executive who heads Bank of America’s loan administration division.

Some in Congress say the FDIC’s approach should be replicated as the Treasury Department buys billions in troubled mortgage debt as part of a $700 billion financial industry bailout.

Reps. Barney Frank, D.-Mass., the chairman of the House Financial Services Committee, and Maxine Waters, D-Calif., both have urged President George W. Bush to appoint Bair to lead a government-wide effort to assist homeowners.

Doing so, they wrote, would "improve the effectiveness of the efforts of the federal government at a time when prompt and efficient action is most urgently needed."

The FDIC says modifying many of those loans — which include lowering interest rates to as little as 3 percent for the initial five-year period — must make economic sense, especially because the agency is soliciting offers from other banks to purchase all or part of IndyMac.

"This is not a social program," said Michael Krimminger, a senior FDIC adviser to Bair. "It’s designed to recover the maximum amount of money."

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