The US Federal Reserve yesterday urged mortgage companies to help borrowers who fall behind with home loan repayments by offering deferral plans and renegotiating the terms of their debt.

The statement is the third made by the Fed this year to encourage lenders to find ways of helping troubled borrowers to keep their homes.

The statement, made in conjunction with other American banking regulators, has no teeth, and the Fed cannot force lenders to renegotiate interest levels or offer payment holidays.

The regulators want the lenders to identify borrowers who are at risk of falling into arrears and offer them new terms.

Last week, President Bush sought to reduce the number of Americans losing their homes after falling behind with mortgage repayments by unveiling similar proposals.

Yesterday, Randall Kroszner, a Fed governor, urged companies that collect mortgage payments to “reach out to financially stressed homeowners”.

The number of homeowners falling behind with mortgage repayments in the United States is rising. Americans have had to cope with 16 rises in interest rate over the past two years.

It is estimated that about two million borrowers will have to cope with soaring repayments by the end of 2008 because the terms of their adjustable-rate loans are due to expire.

Those mortgages, often sold to people with bad credit histories and low incomes, have a low introductory rate that increases rapidly during the life of the loan.

Some homeowners had hoped that by the time their mortgage rate rose, rising house prices would have offset the surging cost. However, the US is now sinking into its worst housing recession for 16 years.

Mr Kroszner said: “Keeping families in their homes is a matter of great importance to the Federal Reserve.”

Shares in NovaStar Financial, the sub-prime mortgage lender, sank 18 per cent on Wall Street yesterday after it was forced to cancel a $101 million (£50 million) rights issue.

Deloitte & Touche refused to sign off accounts for the company ahead of the fundraising unless NovaStar agreed to make additional disclosures, including a paragraph stating that there was “uncertainty” about NovaStar’s ability to survive. The lender also said that it was reducing the number of loans that it offered and that it would sack almost a third of its workforce, closing 12 of its 16 offices.

First American, the California-based mortgage lender and insurer, also said that it was cutting jobs, blaming “rapidly changing economic conditions” for the 1,300 layoffs.

Fears that the mortgage crisis in the US is beginning to hit the wider economy were fuelled when official statistics showed that spending on American construction projects fell unexpectedly in July in the biggest drop for six months. It is thought that builders are reducing the number of homes they build as the US copes with a glut of unsold property on the market.

Kevin Logan, senior markets economist at Dresdner Kleinwort in New York, said that the American economy was potentially in a downward spiral, but recessions were rare: “It doesn’t have to happen. Seventy per cent of the US population own their own property. Of those homeowners, 38 per cent own the property outright, they have no mortgage.

“The bulk of those with mortgages are prime borrowers with jobs and are sitting pretty. It is not as if the entire population is worried about their mortgage.”

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