Paulson's view on housing worsens

WASHINGTON -- Treasury Secretary Henry Paulson said Tuesday the unfolding housing crisis poses a significant risk to the economy and called for Congress and private mortgage companies to move more quickly to help.

But Democrats in Congress said it was the Bush administration that is moving too slowly. They said the latest proposals from Paulson fell far short of what is needed to deal with the prospect of as many as 2 million families losing their homes over the next two years as their adjustable-rate mortgages reset to much higher monthly payments.

In a speech at Georgetown University's law school, Paulson said the financial industry should provide immediate help for homeowners trying to refinance to more affordable mortgages. He also called for an overhaul of laws and regulations governing mortgage lending to halt abusive practices that contributed to the current crisis.

"Let me be clear, despite strong economic fundamentals, the housing decline is still unfolding, and I view it as the most significant current risk to our economy," Paulson said in his most somber assessment of the crisis to date. "The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth."

On Monday, the nation's three biggest banks announced the creation of a fund with up to $100 billion in resources to buy troubled assets such as mortgage-backed securities. Treasury Department officials participated in the behind-the-scenes discussions that led to creation of the fund but no government resources have been pledged to the effort.

Democrats, who are pushing for a bigger government role in resolving the crisis, believe if the administration does not act more forcefully the mounting foreclosures could become a major issue in next year's presidential campaign.

Sen. Charles Schumer, a New York Democrat, said since Aug. 21 when Paulson said he believed the mortgage problems would sort themselves out, there have been an additional 400,000 home foreclosure filings.

The Government Accountability Office released a new report showing that as of June 2007 more than 1 million mortgages were in default or foreclosure, an increase of 50 percent from two years ago.