Paulson Considers New Plan to Revive Housing by Pushing Down Lending Rates

Treasury Secretary Henry Paulson is considering a new plan to lower mortgage rates in an effort to resuscitate the U.S. housing market, according to a report by Bloomberg.

The Treasury, which already has a program to buy mortgage- backed securities issued by Fannie Mae and Freddie Mac, could step up those purchases to drive down interest rates on some loans to 4.5 percent, the official said on condition of anonymity. The plan is preliminary and could change.

The deliberations come as President-elect Barack Obama pledges fresh action to help American homeowners, and on top of a $600 billion initiative announced by the Federal Reserve last week to buy mortgage debt. While lowering mortgage rates to 4.5 percent would allow most homeowners to refinance into a cheaper loan, far fewer will actually qualify, said Rajiv Setia and Nicholas Strand at Barclays Capital in New York. Read the full report here.