U.S. banking regulators have urged lenders to help distressed borrowers unable to make mortgage payments, reports Reuters…

The Federal Reserve and other agencies said they may relax some regulatory penalties for financial institutions that pursue reasonable workout plans with borrowers. Lenders may also receive favorable consideration under the Community Reinvestment Act, the regulators said in a statement.

"The agencies want to remind their institutions that existing regulatory guidance and accounting standards do not require immediate foreclosure on homes when borrowers fall behind on payments," they said.

The statement was issued jointly by the Federal Reserve; Federal Deposit Insurance Corporation; National Credit Union Administration; Office of the Controller of the Currency and Office of Thrift Supervision.

Prudent workout plans a priority

U.S. banking regulators and lawmakers are exploring ways to help millions of borrowers with poor credit history who took out adjustable rate mortgages that start with low introductory monthly payments and then dramatically increase after the first two or three years.

The regulatory agencies said a prudent workout plan is in the long-term interest of both the financial institutions and borrowers and urged lenders to work with consumer groups to help borrowers avoid predatory foreclosure rescue scams.

Earlier, mortgage finance companies Fannie Mae and Freddie Mac told U.S. lawmakers they will introduce new programs to help sub-prime borrowers avoid foreclosure.