Paulson Dons His Cape

It is this fourth category that the Treasury is targeting to modify their mortgages.

"The third element of our plan involves a pragmatic response to the reality that the number of homeowners struggling with their resetting subprime mortgage will increase throughout 2008," Paulson said. "As the volume increase, we will need an aggressive, systematic approach to fast-track able borrowers into a refinance or mortgage modification. This third element does not, and will not, include spending taxpayer money on funding subsidies for industry participants or homeowners."

The Treasury is also proposing a plan to allow state and local governments to "temporarily broaden their tax-exempt bond programs to include mortgage refinancings."

Mozilo, who was also a panelist at the Housing Forum, also wants the government-sponsored enterprises -- Fannie Mae(FNM) and Freddie Mac(FRE) -- to take a more active role in the mortgage crisis.

"I don't think there's a conflict between being safe and sound and playing a greater role in this marketplace," Mozilo said according to Bloomberg. "I think it's very important for Fannie Mae and Freddie Mac to step up. It's the only way out of this to shorten the cycle. Otherwise it's going to be very painful."

Shares of Fannie and Freddie fell between 4% and 5% on Monday.

Fannie Mae CEO Daniel Mudd said during a separate panel discussion at the Forum that the mortgage financing company had eased terms on around $10 billion of subprime loans, according to Reuters.

Mudd also said that he supported the Treasury's proposal to avoid home foreclosures.

"We're supportive," Mudd said, according to Reuters. "But everybody needs to play a role in this."

>To order reprints of this article, click here: Reprints