Paulson Pushes Rate Freeze Plan.

Washington -- The authors of a plan to streamline loan modifications and refinancings for 1.2 million subprime borrows are hoping it will be adopted as a market standard and protect servicers from being sued by disgruntled investors.

We hope that these guidelines will be adopted as reasonable and customary standard practice across the entire servicing industry, Treasury secretary Henry Paulson said.

Treasury officials and federal banking regulators worked out the details of the loan modification plan with the American Securitization Forum and other Hope Now alliance members, which includes lenders and servicers.

ASF is recommending that servicers and trustees of mortgage-backed securities adopt the loan modification guidance framework for freezing the interest rate on certain adjustable-rate subprime mortgages for five years.

While the focus of the ASF framework is to facilitate refinancing and loan modification, it has been designed to balance the interests of borrowers and investors and preserve the benefits of the securitization market, ASF deputy executive director Tom Deutsch said.

The ASF executive stressed, however, that servicers are not expected to take any action that is prohibited by the pooling and servicing agreements. ASF also has recommended standards for servicers to report loan modification activities to investors.

Hope Alliance members service 84% of all subprime loans and they are betting the endorsement of federal regulators, along with rulings by the Internal Revenue Service and Securities and Exchange Commission will shield them from lawsuits.