Fannie Mae and Freddie Mac, which are under government control, said they would help streamline the modification of loans for potentially hundreds of thousands of homeowners who are 90 days or more behind on their mortgage payments.

The Bush administration said it would use the mortgage giants to extend aid to struggling homeowners, a move met with criticism from a top federal regulator, lawmakers and others, who charged it doesn't do enough to stem home foreclosures.

The response intensifies an already fraught debate over the government's approach to the mortgage crisis, which has cast a long shadow over the U.S. economy, from restaurants to auto makers to retail stores.

The Federal Deposit Insurance Corp. and some lawmakers support using part of the government's $700 billion in bailout funds to spur much broader loan modifications. So far, the Treasury and White House have resisted and questioned whether that idea would be effective given the costs to taxpayers.

The potential reach of the program is constrained by the large number of mortgages, especially subprime, which have been bundled into packages of securities and sold to investors around the world. The practical and contractual complexities surrounding these securities renders the mortgages hard to change.

The voluntary plan, which officials hope will be adapted by other mortgage holders, would enable certain borrowers to receive more affordable loans that would make their mortgage payments at most 38% of their monthly income.

Read the full report at The Wall Street Journal