There may still be plenty of questions over the virtue and mechanics of the planned “freezing” of loan interest rates for several hundred thousand distressed home loan borrowers in the US. The US government formally outlined the plan this morning without adding too many details to those reported in recent days.

The plan is intended to provide relief from scheduled rises in interest rates for borrowers on adjustable rate mortgages and with rate resets due between January 2008 and July 2010. The borrower must have taken out their loan January 2005 and July 2007.

The freeze is intended to apply for up to five years. The freeze won’t apply to any borrower who’s faced an interest rate reset in recent months (or faces a reset before the end of this year). The borrower must have less than three per equity in their home, be no more than 60 days in arrears and be able to show they can continue to make repayments.

Estimates attributed to Barclays Capital and Moody’s (and reported by Reuters and the New York Times ) put the number of households likely to benefit at around 250,000, between one fifth and one third the number of households that some political and industry sponsors of the plan say might benefit.

The great stumbling block is that investors in asset pools that own these securities need to agree to the rate resets. The mechanics and probability of this isn’t well explained in the publicly available material.

However, industry entities such as the American Securitisation Forum are co-sponsors of the rate freeze. The idea appears to be that owners of loans in securitised mortgage trusts (which is common in the US) will simply fall into line with this practice that’s been hammered out between industry groups and regulators.

This initiative probably won’t have much affect on broader sentiment in credit markets or resolve the ongoing lack of confidence in valuations of mortgage securities and more complex structures such as CDOs.

Banks continue to have to refinance structured investment vehicles on balance sheet (Rabobank did so overnight, for example, on one entity co-managed with Citibank) while sub-prime lenders in the US continue to hit the wall (Delta Financial being the overnight example).