WASHINGTON — The Bush administration is working to combat the country’s severe housing crisis but there is no simple solution, Treasury Secretary Henry Paulson said Monday, adding that a correction in the housing market is “inevitable and necessary.”
Paulson said the country was facing an unprecedented wave of 1.8 million subprime mortgages that are scheduled to reset to sharply higher rates over the next two years.
He said this raised the threat of a market failure and was the reason the administration brokered a deal with the mortgage industry to freeze certain subprime-mortgage rates for five years to allow the housing market to recover.
“By preventing avoidable foreclosures, we will safeguard neighborhoods and communities and fulfill our responsibility of protecting the broader U.S. economy,” Paulson said in a speech in New York. “However, let me be clear: There is no single or simple solution that will undo the excesses of the last few years.”
Paulson said the deal brokered with the industry did not involve the use of any taxpayer money.
Paulson also raised the possibility that some sort of “systematic approach” may need to be developed to help homeowners with other types of adjustable-rate mortgages. The current plan only involves subprime mortgages — loans offered to borrowers with weak credit histories.
