Feb. 21 (Bloomberg) -- A new proposal to strengthen the U.S. government's response to the housing crisis and keep people in their homes attracted the interest of the Treasury and Federal Deposit Insurance Corp.

Treasury officials are ``interested'' in the proposal, spokeswoman Jennifer Zuccarelli said. FDIC Chairman Sheila Bair ``is interested in learning more,'' said Andrew Gray, a spokesman for the agency in Washington.

Office of Thrift Supervision Director John Reich is working on a plan where a government agency would refinance loans for homeowners whose property values have fallen below their mortgages. Regulators are under fire from Democrats in Congress for failing to halt abusive lending practices during the mortgage boom, and for insufficient efforts to stem the bust.

Treasury Secretary Henry Paulson has repeatedly said he's open to ``additional'' steps. He forged an agreement last week with lenders that offers 30-day freezes on foreclosures so homeowners can work out modifications to their mortgages. Paulson has so far dismissed a proposal for the government to purchase distressed mortgages directly.

Under the OTS proposal, homeowners would be able to refinance their mortgages at the current market values, with the lenders getting ``negative-equity certificates'' to be redeemed once the home is sold. Reich laid out the idea in a press briefing in Washington yesterday.

The OTS is an arm of the Treasury that regulates savings- and-loan banks.

`Innovative' Proposals

``Treasury certainly wants to hear all ideas on ways to help homeowners, so we are interested in learning the details of this proposal as they develop,'' Zuccarelli said. ``We welcome innovative, market-based proposals to encourage flexibility for struggling homeowners.''

Federal Reserve spokeswoman Deborah Lagomarsino said ``we are reviewing'' the OTS proposal.

Negative-equity certificates may help servicers limit their losses and avoid an ``avalanche of borrowers who choose to walk away from the mortgage,'' Scott Polakoff, the OTS senior deputy director, said yesterday. The Federal Housing Administration could help homeowners refinance, he said.

``Creative ideas and innovative thinking about solutions to the housing problems are things that she welcomes,'' Gray said in an e-mailed response to questions, referring to Bair.

Bair, who Treasury Undersecretary Robert Steel credited with being an ``important clarion'' for modifying loans, told lawmakers this month that mortgage companies aren't acting fast enough to curb foreclosures.

To contact the reporters on this story: John Brinsley in Washington at jbrinsley@bloomberg.net; Alison Vekshin in Washington at avekshin@bloomberg.net

Last Updated: February 21, 2008 17:31 EST