Washington Mutual reaches out to borrowers in trouble

The program will allow subprime borrowers who remain current on their existing loans and are bracing for payment increases to apply for discounted fixed-rate loans or other refinancing options.

"Stepping up and helping our customers stay in their homes is in the best interest of our borrowers, our communities and WaMu," Kerry Killinger, chairman and chief executive of the Seattle-based savings and loan, said in a prepared statement.

Home-mortgage delinquencies and foreclosures have risen sharply in recent months, particularly for subprime mortgage customers who pay higher interest rates because of shaky credit or low income.

Subprime loans make up about 6 percent of Washington Mutual's asset portfolio but dealt a heavy blow to the company's latest quarterly earnings.

On Tuesday, Washington Mutual reported a 20 percent drop in its first-quarter profit, blaming the slide largely on a $164 million loss on sales of subprime mortgages.

As housing prices continue to fall in many regions around the country, Washington Mutual has an interest in seeing borrowers repay rather than default because of the declining value of the collateral backing on the loans. The Federal Reserve estimates that it costs a bank $50,000 to foreclose on a home.