Federal Deposit Insurance Corp. Chairman Sheila Bair said the new plan, the most sweeping effort yet, "is a step in the right direction but falls short of what is needed."
Bair, a Bush appointee and independent regulator, has been saying for months that the government needs to do more to help tens of thousands of home borrowers avert foreclosure, including setting standards for modifying mortgages into more affordable loans, and providing loan guarantees to banks that meet them.
Her outspoken public criticism of the Bush administration's mortgage aid programs has won her kudos from Democrats in Congress.
Bair's term as FDIC chairman runs through mid-2011; she previously said she would remain in her position if requested by the new president.
The new plan announced Tuesday is meant to help troubled homeowners by speeding the process for renegotiating hundreds of thousands of delinquent loans held by Fannie Mae and Freddie Mac.
CBS Evening News correspondent Bill Whitaker reports that it was the FDIC that got the ball rolling by offering to modify crushing housing loans when it took over Pasadena-based IndyMac in July. JPMorgan Chase, Bank of America and HSBC followed suit - all lowering interest rates for hundreds of thousands of borrowers.
The plan could have tremendous importance because Fannie and Freddie own or guarantee nearly 31 million U.S. mortgages, or nearly six of every 10 outstanding. Still, government officials did not have an estimate of how many people would qualify for the new program.
The new approach goes into effect Dec. 15.
To qualify, borrowers would have to be at least three months behind on their home loans, and would need to owe 90 percent or more than the home is currently worth. Investors who do not occupy their homes would be excluded, as would borrowers who have filed for bankruptcy.
Qualified borrowers would get help in several ways: The interest rate would be reduced so they wouldn't pay more than 38 percent of their income on housing expenses. Another option is for loans to be extended to 40 years from 30, and for some of the principal amount to be deferred interest-free.
"Given continually rising foreclosures and their impact on the economy, we must address the need for appropriate economic incentives to prevent unnecessary foreclosures," Bair said in a statement. "As we lend and invest hundreds of billions of dollars to help institutions suffering leveraged losses from defaulting mortgages, we must also devote some of that money to fixing the front-end problem: too many unaffordable home loans."