WASHINGTON - THE US banking system regulator on Friday proposed a US$24.4 billion (S$37.1 billion) programme to restructure troubled home loans to avert foreclosures.

The Federal Deposit Insurance Corporation said the effort could, through 2009, avert 1.5 million home foreclosures - actions that intensify the financial crisis by pressuring borrowers and banks.

The FDIC said voluntary loan modifications are being done at a slow pace, affecting only about four per cent of the seriously delinquent loans outstanding.

'It is imperative to provide incentives to achieve a sufficient scale in loan modifications to stem the reductions in housing prices and rising foreclosures,' the agency said.

The FDIC said a programme based on its actions at IndyMac Federal Bank, which the agency seized this year, could be applied to reduce mortgage payments to as low as 31 per cent of a borrower's monthly income.

'The FDIC would be prepared to serve as contractor for Treasury and already has extensive experience in the IndyMac modification process,' the statement said.

FDIC said that of some 4.4 million problem loans, about half can be modified. But even if some of those go back into default, the programme would avert 1.5 million foreclosures.

The plan would offer an incentive to banks to restructure the loans with an FDIC guarantee. If a borrower defaults after the restructuring, FDIC would cover about half the losses for the lender. -- AFP