Saying that "the housing market downturn is the biggest challenge to our economy," Treasury Secretary Hank Paulson today outlined a three-point plan "to avoid preventable foreclosures and to minimize the impact of the housing downturn on the U.S. economy."

Paulson confirmed earlier reports that Treasury has been in talks with financial institutions about ways to temporarily freeze the introductory rates on mortgages of people facing foreclosure. A three- to five-year extension has been discussed, but Paulson did not give any details on a possible time frame.

"An appropriate role for government is to bring the private sector together when innovation has greatly increased the complexity of achieving beneficial solutions for all parties involved," he said. "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."

It has been estimated that nearly $1 trillion worth of mortgages will be reset for the first time this year or next.

"We will need an aggressive, systematic approach to fast-track able borrowers into a refinance or mortgage modification," Paulson said.

The Treasury secretary also called for state and municipal governments to be given new power to issue tax-exempt bonds to fund refinancing programs.

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