The Obama administration is hammering out a program to subsidize mortgages in a new front to fight the credit crisis, sources familiar with the plan told Reuters Thursday, firing financial markets.

In a major break from existing aid programs, the plan under consideration would seek to help homeowners before they fall into arrears on their loans. Current programs only assist borrowers that are already delinquent.

U.S. stocks shot up from session lows on the report, with the blue chip Dow Jones industrial average jumping 245 points, or 3.0 percent to close down just 6 points. Earlier in the day, stock prices had been testing the lows seen last November on investor worries about the economy.

Under the evolving plan, homes would undergo a standardized reappraisal and homeowners would face a uniform eligibility test, sources said.

Bank regulators have used 38 percent of gross income as a benchmark for one mortgage relief program. If a homeowner is spending more than that amount on housing, they may qualify for a streamlined loan program, but the Obama administration may choose a lower percentage as a trigger for relief in any new plan.