The U.S. Treasury Department and members of Congress are preparing to move forward with plans to expand government-backed refinancing programs to underwater homeowners whose loans are packaged in private-label securities.

Senator Jeff Merkley, an Oregon Democrat, is drafting a bill modeled on a proposal he outlined last year to set up a federal trust to purchase or guarantee refinanced mortgages, according to two people familiar with the discussions who asked not to be identified because the bill hasn't been introduced.

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