Paulson Dons His Cape

Updated from 11:55 a.m. EST

Treasury Secretary Henry Paulson on Monday acknowledged a government-led plan to help subprime borrowers avoid foreclosure.

Paulson, in a scheduled presentation at the National Housing Forum in Washington, D.C., said the Treasury is working on a "three-point plan" to "avoid preventable foreclosures" and to "minimize the impact" of the housing downturn on the U.S. economy.

"As we are all aware the housing and mortgage markets are working through a period of turmoil, as are other credit markets, as risk is being reassessed and repriced," Paulson said at the forum, hosted by the Office of Thrift Supervision. "The number of subprime mortgage resets is going to increase dramatically next year, and we need to make sure the capacity is there to handle it," he said.

Paulson said the plans under discussion with executives within the mortgage industry do not -- and will not -- include government-sponsored subsidies to lenders or borrowers.

"First we are increasing efforts to reach able homeowners who are struggling with their mortgages," he said. "Second we are working to increase the availability of affordable mortgage solutions for these borrowers. Third, we are leading the industry to develop a systematic means of efficiently moving able homeowners into sustainable mortgages."

Shares of the large mortgage lenders, including Countrywide Financial(CFC Quote - Cramer on CFC - Stock Picks), Washington Mutual(WM Quote - Cramer on WM - Stock Picks), Wells Fargo(WFC Quote - Cramer on WFC - Stock Picks) and Citigroup(C Quote - Cramer on C - Stock Picks), were falling after Paulson's speech. Most of the stocks had jumped on Friday, following a report in the Wall Street Journal of the plan to freeze some rates.

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