Bush to outline subprime mortgage initiative

WASHINGTON, Aug 30 (Reuters) President George W Bush will outline reforms tpday intended to help homeowners with subprime mortgages avoid default, a senior US administration official said.

''He will also discuss reform efforts to prevent these kinds of problems from arising in the future,'' the official told Reuters yesterday on condition of anonymity.

Financial markets around the world have been in turmoil in recent weeks as defaults have risen on so-called subprime mortgages to less creditworthy borrowers. The Federal Reserve has taken steps to increase liquidity in markets and faces calls for interest-rate cuts to head off a broader credit squeeze that could drag economic growth down.

Mr Bush in a statement scheduled for 2140 hrs IST in the White House Rose Garden will discuss the need for Congress to pass Federal Housing Administration reform legislation aimed at giving the agency the flexibility to help subprime mortgage borrowers, the official said.

The risk of a credit squeeze stemming from rising defaults on subprime mortgages has fueled worry that consumers will trim spending at a rate that could tip the economy into recession.

An administration official told Reuters that Mr Bush ''will discuss his willingness to work with Congress in a bipartisan way to reform the tax code to help troubled borrowers rework their loans.'' Stock prices fell yesterday on concern that credit market upheaval was spreading, with the Dow Jones industrial average (<.dji>) down 50.56 points to close at 13,238.73.

Mr Bush is also expected to direct Treasury Secretary Henry Paulson and Housing Secretary Alphonso Jackson to work together on an initiative to help troubled mortgage holders obtain services and products needed to prevent default, the official said.

He will discuss the need for rigorous enforcement of predatory lending laws and strengthening lending practices, the official said.

REUTERS GL ND0856