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In a bid to contain surging home foreclosures, several states are establishing funds to help homeowners struggling with subprime mortgage loan repayments refinance to more affordable loans, according to the Wall Street Journal. The states include Maryland, Massachusetts, New Jersey, New York, Ohio and Pennsylvania, and they are expected to invest a collective $500 million in the funds. The Massachusetts Housing Finance Agency plans to join forces with Fannie Mae to prevent foreclosures on about 1,000 homes. The Agency will sell bonds to finance $60 million and Fannie Mae will provide $190 million. The New York Mortgage Agency is planning to initiate a $100 million program designed to assist 500 families. The Journal reports that over a million American homeowners are forecast to enter foreclosure this year, representing approximately 2.3% of the country's 44 million home loans. According to Freddie Mac, about 60% of those homeowners are carrying subprime mortgages. There is some concern that taxpayers could end up paying the costs of refinanced loans that are themselves unpaid. "This only works if you're helping people who pay back what they borrow," said Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard University.

Sources: Wall Street Journal, Reuters
Commentary: The American Dream Is Overbought & OverbuiltBrief Foreclosure History & Mortgage Delinquency MapsAre The Ratings Agencies Really Taking a 'Tough Stance' on Subprime Mortgage Debt?
Stocks/ETFs to watch: Fannie Mae (FNM), Countrywide Financial Corp. (CFC), Accredited Home Lenders Holding Co. (LEND), Novastar Financial Inc. (NFI), Fremont General Corp. (FMT). ETFs: Vanguard REIT ETF (NYSEARCA:VNQ)

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Source: Several States Helping Subprime Borrowers -- WSJ