Feds Ponder Rescue Plans as Housing Slump Worsens

With one in 10 US homeowners owing more on their homes than they’re worth, the highest proportion of negative-equity loans since the Depression, the government is weighing plans that would apply the brakes to the rapidly accelerating housing market collapse, the New York Times reports. Possibilities include federal loan guarantees and spending billions refinancing at-risk mortgages.

Bank of America says the credit crunch will lead to “an unprecedented number” of home foreclosures and proposes a massive federal swap of delinquent mortgages for fixed-rate loans. Home prices slipped 6% last year, and experts say they could fall 25% more by 2009, reports Time. The real worry, one economist said, is that “banks will eventually run out of capital.” (More housing crisis stories.)