NEW YORK - A mortgage banking group on Wednesday said it proposed to top U.S. officials a new plan offering forbearance to unemployed homeowners and asked the Treasury for credit to support the plan.

The Mortgage Bankers Association, and members including Bank of America Corp and Wells Fargo & Co, developed the plan amid signs that a majority of distressed borrowers involve the loss of income, which could make them ineligible for programs aimed at curbing the foreclosure crisis, the MBA said.

Without income, many borrowers are not qualifying for the flagship U.S. Home Affordable Modification Program (HAMP).

But to encourage many loan servicers to participate in the plan, the MBA is asking the U.S. Treasury to provide special loans to the companies that must advance payments to investors during the forbearance period. The program would be voluntary.

Many servicers are already stressed as efforts to curb foreclosures have extended the time which a loan stays in delinquency. This means servicers must provide advances for a longer period, which hurts their profitability since the funds are typically borrowed.

Last year, a coalition of independent mortgage servicers warned that the U.S. foreclosure prevention program may push their financing costs higher and hinder their ability to work with borrowers. Extended foreclosure timelines have also increased costs to U.S. mortgage finance companies Fannie Mae and Freddie Mac, which guarantee payments on loans.

The MBA met with Treasury, White House and Department of Housing and Urban Development representatives last week, said John Courson, the association's president and chief executive. The proposal's reception was good since the officials are actively working on unemployment relief, he said.

Under the plan, an unemployed borrower could get some forbearance for 90 days, and may be reevaluated for two more periods, the MBA said. At the end of nine months, or when the borrower gets a job, they will be evaluated for the HAMP.

Borrowers with such a precipitous drop in income can't qualify for most loan modification programs, so we are looking for ways to allow those borrowers to keep their homes while they look for another job, Courson said.

Other companies that helped develop the MBA proposal are Citigroup Inc's CitiMortgage, American Home Mortgage, SunTrust and a unit of JP Morgan Chase & Co. (Editing by Kenneth Barry)

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