NEW YORK (Bloomberg) — New York Governor Eliot Spitzer said he will push for legislation to prohibit unscrupulous mortgage lending practices and strengthen enforcement of the industry.

The goal is to "require more in-depth evaluation of borrowers' ability to repay, prohibit certain loan practices, clarify mortgage brokers' duties to borrowers, and strengthen state enforcement tools," Spitzer said in a statement.

Spitzer also called on the financial services industry to create a fund to help borrowers modify loans and keep them in their homes.

"The state can't do it alone," Spitzer said at a news conference in Manhattan with state Attorney General Andrew Cuomo. If private companies "are willing to take writedowns by putting together this fund, they can stabilize entire classes of mortgages."

The fund could be modelled after Treasury Secretary Henry Paulson's proposal to bail out the credit market, Spitzer said.

The fund would "fundamentally stabilise this sector," Spitzer said. He also said he will push mortgage lenders to modify home loans on a "mass" scale to stem foreclosures. The federal government has abdicated its responsibility to regulate the mortgage industry, Spitzer said.

Delinquent homeowners need private sector help in addition to the $100 million in aid from Fannie Mae that the state announced in July, Spitzer said.

Cuomo yesterday announced plans to subpoena Fannie Mae and Freddie Mac as he expanded his investigation into "widespread" collusion between real estate appraisers and lenders including Washington Mutual Inc.

On November 1 Cuomo sued First American, the biggest US title insurer, for illegally boosting home appraisals under pressure from Washington Mutual.