The loans would not be guaranteed by Fannie Mae, Freddie Mac, or the FHA. Lenders would be charged a fee to pay for the program - something that also requires congressional approval.
Even before Obama detailed his program, Republican House leaders said they wouldn't support it.
Donovan emphasized, however, that other pieces of the administration program were moving forward, including efforts to accelerate refinancing for Fannie and Freddie loans that are "underwater," as well as a pilot program to turn bank-owned houses into rental properties in 10 high-foreclosure areas.
In addition, the Treasury has agreed to boost incentives to Fannie and Freddie to reduce the principal balance on loans they modify under the Home Affordable Modification Program.
To date, borrowers qualifying for modification receive from 6 to 21 cents on the dollar to write down principal on their loans. Treasury will triple those incentives, paying from 18 to 63 cents on the dollar.
Donovan visited in the same week HUD decided to extend its oversight of the Philadelphia Housing Authority.
HUD took over PHA a year ago, after the agency's five-member board was pressured to resign amid complaints of lax oversight during the 13-year tenure of former executive director Carl R. Greene.
HUD awaits the results of a forensic audit of PHA, and Donovan said the situation in Philadelphia had had an impact on how the department deals with other housing authorities.
"We have begun a series of steps toward greater transparency," he said, "because we do feel one of the major lessons to be learned was a lack of transparency."
HUD has instituted salary caps for executive directors and senior staff of public housing agencies, Donovan said. "They're required to benchmark those salaries and make them public."
In his last year at PHA, Greene was paid $300,000 - more than Donovan.
The secretary said HUD was "making sure we're looking at legal expenses more closely, and strengthening conflict-of-interests rules."
PHA spent more than any other public housing authority on outside legal services. The HUD inspector general's office, meanwhile, is investigating the awarding of PHA legal work to a law firm that employs the son of former Mayor John F. Street. The former mayor was chairman of PHA at the time of the HUD takeover.
Contact Alan J. Heavens
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