Jan. 22 (Bloomberg) -- Congressional Democrats want to expand availability of federally insured mortgages for subprime borrowers as part of the economic-stimulus plan being negotiated with the White House, Representative Barney Frank said.

Frank, the chairman of the House Financial Services Committee, said today in a telephone interview it's ``very likely'' legislation to overhaul the Federal Housing Administration will be part of the $140 billion to $150 billion plan for jumpstarting the U.S. economy amid increasing signs of a recession. The measure would help homeowners refinance mortgages to keep from losing their homes, Frank said.

``You would not ordinarily think of a bill to restructure the operations of the Federal Housing Administration as stimulative, but in this case it is because we're talking about foreclosure avoidance,'' said Frank, a Massachusetts Democrat.

Frank and other Democratic lawmakers are working with the Bush administration to develop an economic plan as the subprime- mortgage crisis continues to roil markets and squeeze consumers. Senate Majority Leader Harry Reid, of Nevada, said today he wanted to get the plan through Congress and to President George W. Bush within three weeks.

Lawmakers are also considering a provision that would temporarily let Fannie Mae and Freddie Mac buy home loans above $417,000 for packaging into securities, Frank said. The language is part of a Senate bill that would create a tougher regulator for the two largest U.S. mortgage finance companies.

Tax Rebate

Democrats are also weighing a tax rebate for Americans of all incomes, assistance to state governments, and expanded unemployment and food-stamp benefits, Frank said. The package will total $140 billion to $150 billion, he added.

Bush called for a stimulus package of the same amount, or about 1 percent of U.S. gross domestic product, in a plan announced last week. His spokeswoman said today the White House isn't ruling out a larger amount.

The Federal Reserve's emergency rate cut today underscores the need for a stimulus package ``because obviously monetary policy can only do so much,'' Frank said.

The Fed lowered its benchmark interest rate from 4.25 percent to 3.5 percent, the largest single reduction in almost two decades, one week ahead of its scheduled policy meeting.

Frank said a stimulus package that will pump money into the economy quickly will make it less necessary for the Fed to make further rate cuts.

To contact the reporter on this story: Alison Vekshin in Washington at avekshin@bloomberg.net.

Last Updated: January 22, 2008 17:25 EST