Republicans are wary of Democratic proposals that would have the federal government play a starring role in rescuing homeowners.

Yet in some GOP districts, opposition to using taxpayers’ money to solve the deepening housing crisis must be weighed  against cries from voters trapped in onerous mortgages worth more than their homes.

“We’re all interested in trying to mitigate the harm in the economy in a market-oriented way that does not reward bad behavior,” he said.

Pressure is growing as Democrats prepare to move legislation that 18 of Putnam’s colleagues have already come out against.

Senate Banking Committee Chairman Chris Dodd (D-Conn.) and House Financial Services panel Chairman Barney Frank (D-Mass.) would allow the government to purchase billions of dollars’ worth of mortgages at a discount — but only after lenders have agreed to write down their costs to reflect the loans’ true value. Under Frank’s plan, the loans would be refinanced for a subset of troubled borrowers and then resold to investors.

Writing in an op-ed that ran in The Washington Post on Sunday, Frank said that some might interpret his approach as “ ‘bailing out’ people who made mistakes.” But Frank said many of those people were “victims of unfair lending practices.”

Frank is expected to unveil the details of his proposal later this week. In an interview with The Hill, he said that it would ultimately cost the taxpayers nothing and could even boost revenues to federal coffers, adding that the mortgages would be resold with the government’s backing.

“We’ll get at least as much as we pay for them,” he said.

Foreclosures hit their highest level on record in the fourth quarter of 2007, the Mortgage Bankers Association reported last week.

Republicans last month blocked a Senate proposal to allow judges to trim the mortgage debts of borrowers at risk of losing their homes. Now they are stiffening their resistance to the idea of a large-scale federal intervention in the housing market, even as the sector’s problems appear to be worsening.

Frank’s plan would require at minimum a hefty federal outlay, inviting resistance from Republicans as well as many centrist Democrats who may object to it as fiscally reckless. It also risks exposing taxpayers to greater costs if the government overpays for the mortgages or has trouble off-loading them.

House conservatives are already mobilizing against such a large-scale federal response, arguing that the economy is resilient enough to weather the turmoil in the housing market on its own.  

Reps. Tom Price (R-Ga.) and 17 fellow Republicans on Monday sent a letter to President Bush and Treasury Secretary Henry Paulson in support of their “continued opposition” to such proposals, which both have dismissed as bailouts for lenders and speculators.

Rep. Tom Feeney (R-Fla.), who signed on to the letter, said a plan such as Frank’s would shift a huge amount of risk from borrowers onto taxpayers.

Price said that Republicans could support less aggressive measures, such as legislation Sen. Johnny Isakson (R-Ga.) has introduced to grant tax breaks to buyers of foreclosed properties. “The mid-range alternatives would be attractive for many of us folks,” he said.

But Republicans from places hit hard by the foreclosure crisis may be tempted to go further. Some might follow Rep. Steve Chabot (R-Ohio), who bucked Republicans by backing legislation allowing judges to rewrite mortgage contracts.

Meanwhile, advocates for borrowers and other groups are upping the pressure on Congress to intervene. The foreclosure crisis is at the top of the agenda of the mayors’ conference in Washington this week, at which House Speaker Nancy Pelosi (D-Calif.), Frank and other lawmakers will speak.

The Bush administration has been prodding lenders to modify repayment schedules for struggling borrowers. It announced last week that more than 1 million so-called “workouts” have occurred since July. Yet critics say the effort won’t be enough to avert a second wave of foreclosures.

The notion of expanding the federal role in propping up the housing market got a boost last week when Federal Reserve Chairman Ben Bernanke said in a speech that “more can and should be done” to help millions of troubled borrowers.

Democrats and borrower advocates have seized on Bernanke’s remark — as well as reports that a unit of the Treasury Department, the Office of Thrift Supervision, is drafting a plan to write down loans for borrowers facing foreclosures — as evidence that the administration may be open to a greater federal role in stabilizing the housing market.

Frank has been trimming the cost of his proposal in an effort to make it more palatable to Republicans and conservative Democrats.

A document posted recently on the Financial Services Committee website said it could cost as much as $15 billion over five years. But Frank said that the government outlay in the final plan would be closer to $5 billion, which he expects the government to recoup down the road.

The Massachusetts Democrat says his plan won’t help lenders or speculators, but admitted that some people who borrowed irresponsibly would benefit.

The alternative, he argued, would be allowing the housing crisis to drag down the economy unnecessarily. “The economic slowdown will be longer and deeper if we don’t do enough about foreclosures,” he said.