When Congress started fashioning a sweeping rescue package for struggling homeowners earlier this year, 2.6 million loans were in trouble. But the problem has grown considerably in just six months and is worsening.

More than 3 million borrowers are in distress, and analysts are forecasting a couple of million more will fall behind on their payments in the coming year as home prices fall further and the economy weakens.

Those stark numbers not only illustrate the challenges for lawmakers trying to provide some relief to their constituents but also hint at what the next administration will be facing after the election. While the proposed program would help some homeowners, analysts say it would touch only a small fraction of those in trouble – the Congressional Budget Office estimates it would be used by 400,000 borrowers.

“It’s not enough, even in the best of circumstances,” said Mark Zandi, chief economist of Moody’s Economy.com. The number of people who will be helped “is going to be overwhelmed by the 3 million that are headed toward default.”

Last week, the Senate voted overwhelmingly to advance the bill, and the House passed a version last month. Because of procedural delays in ironing out differences between the two houses, the Senate is not expected to pass the bill until after the Fourth of July recess.

SHARING GAINS

The bill would let lenders and borrowers refinance troubled mortgages into more affordable 30-year fixed-rate loans that are backed by the government.

The White House, which initially threatened to veto the measure, has indicated that it’s open to supporting the bill if certain provisions are removed.

Rep. Barney Frank, D-Mass., a central force behind the legislation, said Friday that the plan may not do enough. Frank, chairman of the House Financial Services Committee, said that even after a bill like this, “you may need more.”

But not everyone supports government interventions. Some Republicans, like Sens. Jim DeMint of South Carolina and Jim Bunning of Kentucky, say the proposal would use government subsidies to bail out reckless lenders and borrowers. They suggest that the housing market will correct itself more quickly if Congress does not intervene.

To take part in the proposed program, lenders would have to lower each debt obligation to 85 percent of the home’s current value. Borrowers would stay in their homes but would have to pay a 1.5 percent annual insurance premium. If homes’ values grow and borrowers sell or refinance, they would have to share the gain with the government.

PLAN MIGHT FALL SHORT

To qualify, borrowers would have to be in enough trouble that they could not afford their current mortgage payments but financially strong enough to make payments on their new loans.

“No matter how you fiddle with terms of their present situation, it’s not going to save the day” for many borrowers, said Bert Ely, a housing finance consultant based in Washington. “They are not in a good financial situation because they have lost their jobs and they are overburdened with credit cards and home equity loans.”

Even if the Federal Housing Authority insures hundreds of thousands of new mortgages, analysts do not expect the tide of foreclosures to ebb until the economy improves markedly. Zandi and others forecast that 2 million to 3 million mortgages will default – beyond the 3 million in trouble now – and economists at Lehman Bros. say home prices nationally may drop 15 percent by the end of 2009. That might force policymakers to consider further interventions.

There is a precedent for such government endeavors, but not since the New Deal in the 1930s.