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U.S. President George W. Bush announces a plan backed by mortgage lenders to freeze interest rates on some sub-prime loans. The plan would only affect people who can afford mortgages at their current rates but wouldn't be able to afford them at a higher rate. U.S. President George W. Bush announced a plan on Thursday (December 6) aimed at slowing a wave of home loan foreclosures that has threatened to knock the U.S. economy into recession and rattled investors worldwide. The announcement came on the same day foreclosures hit a record high in the third quarter, according to the Mortgage Bankers Association. "Data released this morning confirmed the difficulties facing the housing market," said President Bush, who nevertheless expressed optimism that the economy will be able to withstand the crisis. "One reason for confidence is that the downturn in housing comes against a backdrop of solid fundamentals in other areas -- including low inflation, a healthy job market, record-high exports. America's economy has proved itself highly resilient -- and it is strong, and it is flexible, and it is dynamic enough to weather this storm." Bush said the plan, hammered out by the U.S. Treasury Department in talks with mortgage industry leaders, was not intended to "bail out" lenders, speculators or those who knew they could not afford the homes they bought. "The rise in foreclosures would have negative consequences for our economy. Lenders and investors would face enormous losses. So they have an interest in supporting mortgage counseling and working with homeowners to prevent foreclosure," said Bush. The Bush administration hopes that it can help many of the two million homeowners who took out adjustable-rate loans with payments due to move sharply higher soon by offering some of them a five-year mortgage-rate freeze. Officials fear 500,000 Americans are at risk of losing their homes as US$367 billion worth of adjustable-rate subprime mortgages reset to higher interest rates in 2008 and 2009. The Mortgage Bankers Association said foreclosures reached a record high in the third quarter, with 1.69 percent of loans outstanding in the foreclosure process. Late payments on mortgages hit the highest level since 1986. Bush said an estimated 1.2 million homeowners could be eligible for assistance to avoid foreclosure over the next couple of years. However, private-sector analysts said the numbers would likely be much lower. The rate freeze is aimed at owner-occupied homes, not those bought by speculators hoping to profit when the housing market was booming. Under the plan, homeowners who have shown they are a reasonable credit risk, but who could not afford their homes with higher mortgage rates, would qualify for "fast-track" loan modification and the five-year interest rate freeze. Borrowers who can afford the current loan terms would get help refinancing, but those who cannot and were poor credit risks would probably still lose their homes. Rising foreclosures concentrated among subprime borrowers triggered financial market turmoil because the mortgages were packaged and resold to investors around the world. Many investors did not fully understand what they were buying, and relied instead on credit ratings agencies that initially gave the securities high marks. When defaults rose, the market for those securities dried up, making it hard for holders to sell or value them. Banks have since recorded tens of billions of dollars in losses tied to those securities. The plan which has to be approved by the U.S. House of Representatives and Senate is widely expected to pass.