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A new proposal from the office of Sen. Jeff Merkley, D-Ore., is taking some cues from the Franklin Roosevelt administration to help struggling homeowners.

The Rebuilding American Homeownership Trust, a temporary trust, would buy mortgages from families up to date on their loan payments but underwater in value. It’s modeled after the Home Owners’ Loan Corporation Act, which was enacted during the Great Depression to help families refinance unhealthy mortgages into long-term, fixed-rate mortgages.

In a conference call last week, Merkley said 8 million Americans are struggling to repay loans with high interest rates. Of those, 4 million do not have access to the Home Affordable Refinance Program through Fannie Mae or Freddie Mac.

鈥淭hey are completely, 100 percent stranded,鈥� Merkley said.

The proposed trust is designed to help those people without using taxpayer dollars. The prediction is for a 2 percent spread between the cost to issue the trust money and the resulting interest earned from homeowners. The plan envisions the federal government selling bonds to investors to raise money.

Three mortgage options would be established.

The first would be a 15-year, 4 percent mortgage designed to help families rebuild equity quicker. The second would be a 30-year, 5 percent mortgage with lower monthly payments. The third would be a two-part mortgage with a 95 percent first mortgage on the home’s current value, and a second mortgage on the balance. The second mortgage would not accrue interest or require payments for five years; it’s designed to help lower monthly payment obligations.

The trust would be piloted immediately and located in the Federal Housing Administration, the Federal Home Loan Banks or the Federal Reserve. The trust would require no legislative action and wind down and disappear as specially refinanced mortgages were sold or repaid.

Last week during a banking committee meeting, Treasury Secretary Timothy Geithner voiced his support of the program. Geithner said it was good economic policy, that it would not leave taxpayers exposed to any meaningful risk and that it would help reduce the remaining pressures the housing market has put on the economy as a whole.

鈥淭his is a win on every level,鈥� Merkley said. 鈥淭his is a win for the families that either get a much shorter term on their loan, get out from underwater much more quickly 鈥� or by having a longer term mortgage, they dramatically reduce their payments.鈥�