Government sources have confirmed that the Treasury Department and FDIC are working on a plan for the government to guarantee the mortgages of up to three million homeowners facing possible foreclosure. The plan would cost between $40 billion and $50 billion and cover up to $600 billion in mortgage loans.

However, both the White House and FDIC indicated on October 29 that an agreement had not yet been reached. A White House spokesman emphasized that no final decisions have been made, while an FDIC spokesman said it would be premature to speculate about any final framework for the program.

FDIC Chairman Sheila Bair has been the clear frontrunner among officials in the Bush Administration when it comes to recognizing the need for expedited, streamlined mortgage loan modifications.

In a speech she delivered more than a year ago, Bair said, “We need to do more, and do it faster. We have a huge problem on our hands. We can’t just sit here doing this kind of case-by-case, laborious restructuring process with all these millions of subprime hybrid ARMs. I think some categorical approaches are needed, and needed urgently.”

Bair called for fast action for owner occupied housing where the loan is current. “Just convert that subprime hybrid ARM into a fixed-rate mortgage. Keep it at the starter rate. Convert it into a fixed rate. Make it permanent. And get on with it.”

In an October 29 speech, Bair said the nation needs to get ahead of the curve on foreclosures before it can hope to solve the housing crisis.

A week earlier, she had acknowledged while testifying before the Senate Banking Committee that the nation’s efforts to avoid unnecessary foreclosures are falling short. “We are behind the curve,” Bair warned the committee. “We are falling behind.”

The chairman acknowledged that there has been some progress, but warned it hasn’t been enough. She declared that lenders need to act quickly and dramatically to provide wide-scale, systematic loan modifications.