President Bush announced plans to freeze mortgage rates for some of the riskiest borrowers with the hopes of slowing the rising foreclosure rates.

The initiative is an agreement between federal regulators and the private lending industry that President Bush says will help 1.2 million homeowners. "We should not bail out lenders, real estate speculators, or those who made the reckless decision to buy a home they knew they could never afford," Bush said. "But there are some responsible homeowners who could avoid foreclosure with some assistance."

The announcement comes on the same day that the Mortgage Bankers Association said the percentage of mortgages entering foreclosure hit an all-time high during the third quarter.   

Under the plan, subprime borrowers will have several options for assistance. The five-year extension of the introductory rates would only apply to homeowners who took out adjustable-rate mortgages between 2005 and July 30, 2007, and who are facing steep resets of their rates in 2008 and 2009. Only a fraction of the 1.2 million borrowers will be eligible for the freeze.

Other borrowers may receive help in the form of refinancing assistance and loans secured by the Federal Housing Administration. The administration set up a hotline for borrowers to call to find out their eligibility.

Even before the Bush administration officially announced its plans, the initiative encountered strong criticism. Treasury Secretary Hank Paulson said more than once during today's press conference that the plan "is not a silver bullet" and that finding a solution to the subprime problems will be an evolution. He said there are approximately 1.8 million subprime mortgages scheduled to reset during 2008 and 2009.

Bloomberg News, citing estimates from Credit Suisse Group, says that more than 30 percent of borrowers with subprime A.R.M.'s are behind on their payments before their loans reset at a higher rate. Credit Suisse forecasts that 775,000 homes, with $143 billion of mortgage debt, will go into foreclosure in the next two years.

In addition to critics who say the administration is not doing enough to help homeowners, others say that the government has no business meddling in the market by helping borrowers who got in over their heads. Yet even some conservatives say the government needs to do something.

"Very large losses have already happened," Alex J. Pollock, a resident fellow at the American Enterprise Institute, told the Washington Post. "We can't somehow stop them from happening because they've already happened. You need to go through an adjustment and a repricing."

And, as the Wall Street Journal said earlier, the broad outlines of the plan have already been greeted with skepticism by some investors in mortgage-backed securities.

Also on Portfolio.com

Market Movers: The Subprime Monologues
Market Movers: The Subprime Plan: Now, It's Political
Market Movers: Do We Need to Bail Out Homeowners?