Washington - President George W Bush pledged help for struggling US homeowners Friday to help ease the nation's mortgage crisis, which the top US central banker warned would continue for months yet. After weeks on the sidelines as growing numbers of Americans lost their homes to foreclosure, Bush called for tax code changes and expanding a government mortgage insurance programme as first aid.
"Owning a home has always been at the centre of the American dream," Bush said at the White House.
That dream has turned sour for thousands of Americans during this year's meltdown in the US subprime mortgage industry, which has rocked financial markets and sparked fears of an economic slowdown.
Bush emphasized that there would be no government bailout for "speculators or those who made the decision to buy a home they knew they could never afford."
"A federal bailout of lenders would only encourage a recurrence of the problem," he said.
Separately, Federal Reserve head Ben Bernanke said more US homeowners are likely to default on their risky subprime loans over the coming months, extending uncertainty about US economic growth.
The US central bank "stands ready to take additional actions as needed" to protect the broader US economy, the Fed chief said in a speech in Wyoming.
US stocks rallied Friday on speculation that the Fed will cut its benchmark interest rate at its next policy meeting September 18. Already, the Fed has pumped tens of billions of dollars into the markets - the most since the September 11, 2001 terrorist attacks - to stave off a broader credit crunch
To help homeowners, Bush urged Congress to pass reforms of the Federal Housing Administration (FHA) that would allow the agency to reach families "with low incomes and less than perfect credit records or little savings."
A new FHA programme will help homeowners who have a good credit history but currently face a credit squeeze, he said.
Bush also called on lawmakers to change the tax code to temporarily lift a tax penalty for homeowners who get their bank to lower the amount of their loan.
In July, foreclosures of US homes were up 93 per cent from a year earlier as nearly 180,000 owners were forced to give up their homes, according to RealtyTrac, an foreclosure broker.
US lenders have pushed subprime loans to the least creditworthy borrowers, helping many Americans buy homes and driving up home prices in the last few years.
But a sharp slowdown in US homebuilding, a drop in home values and rising interest rates have forced many of those homeowners to default on their mortgages, squeezing the financial companies that made the loans and leading to a broader, global credit crunch.
Bernanke warned that the crisis was far from over .
"With many of these borrowers facing their first interest rate resets in coming quarters, and with softness in house prices expected to continue to impede refinancing, delinquencies among this class of mortgages are likely to rise further," he said.
And the number of unsold new US homes remains high, "suggesting that further declines in homebuilding are likely," he said.
Like Bush, he made plain there would be no Fed bailout for failing lenders or investors stuck with losses, saying that "is not the responsibility of the Federal Reserve."
