Mortgage rates seen below 4%

WASHINGTON — Government efforts to provide easier credit to consumers and help housing-finance companies could push mortgage rates "well below 4 percent," a federal regulator said Wednesday.

James Lockhart, whose agency oversees government-controlled mortgage giants Fannie Mae and Freddie Mac, made the comments at a meeting of Women in Housing & Finance, an industry group. He did not say how long it would take to achieve such a drop and has declined to provide a firm target for mortgage rates.

Rates fell sharply after the Federal Reserve announced plans late last month to buy up to $600 billion of mortgage-related securities and other debt issued by Fannie, Freddie and the Federal Home Loan Banks. In the two banking days following the Nov. 25 announcement, the national average rate on a 30-year fixed-rate mortgage dropped 0.28 percent, to 5.5 percent, according to financial publisher HSH Associates.

Fannie and Freddie own or guarantee about half of the $11.5 trillion in U.S. outstanding home-loan debt.

Neel Kashkari, who heads the Treasury office overseeing the $700 billion bailout of the financial system, told a congressional panel last week that the agency was reviewing a proposal to push mortgage rates down to 4.5 percent.

The government's efforts to trim mortgage rates are one part of the attempt to reduce record-high foreclosures and loan delinquencies. Other plans include a simplified loan-modification program, and interest-rate cuts by the Federal Reserve.

Weiss Research analyst Mike Larson said this week that government attempts to drive down mortgage rates are having some success. "Lower prices in some of the hardest-hit markets, and almost irresistible bargains on distressed properties, are also bringing some buyers out of the woodwork," Larson said.

But lower mortgage rates also could prevent housing prices from dropping as much as they otherwise would. That would mute their effect on the overall economy.