President George Bush's proposal to allow a certain segment of subprime borrowers to refinance into loans insured by the Federal Housing Administration is being seen as a measured first step to help troubled borrowers, although one that will likely only have a limited impact. The FHA modernization steps are expected to help about 240,000 homeowners refinance and avoid foreclosure, but it is considered a drop in the bucket when more than a million loans could default.

The FHASecure program is meant to help homeowners who have good credit but who have missed mortgage payments because of increased rates. It will allow these people to refinance their mortgage for next year and avoid foreclosure. The FHA is also being reformed to reach more homeowners by charging higher premiums on riskier loans, but allowing more people access to the program.

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