Bush Urges Help on Resets.

WASHINGTON -- With rising delinquencies and defaults, mortgage servicers are coming under increasing pressure to help troubled borrowers restructure their loans, particularly adjustable-rate subprime loans that are due to reset.

President George Bush has instructed the Treasury Department and Department of Housing and Urban Development to work with lenders, servicers and nonprofit housing groups to identify and help struggling homeowners through counseling and loan modifications.

"I strongly urge lenders to work with homeowners to adjust their mortgages. I believe lenders have a responsibility to help these good people to renegotiate so they can stay in their homes," President Bush said.

To facilitate writedowns, the president pledged to work with Congress to temporarily amend the tax code so homeowners are not hit with a large tax bill when a lender forgives $20,000 of the principal amount of the mortgage. Congress has to pass legislation to make this change.

"When your home is losing value and your family is under stress, the last thing you need is to be hit with higher taxes," the president said in outlining his administration's efforts to help troubled subprime borrowers.

To increase refinancing options, the Bush administration has relaxed Federal Housing Administration underwriting criteria so FHA lenders can refinance delinquent ARM borrowers.

Treasury undersecretary Robert Steel told a House panel last week that he is working with the government-sponsored enterprises - Fannie Mae and Freddie Mac - to develop loan products to help refinance subprime borrowers.