"The idea of across-the-board modifications is not something that this group is looking to do … , and it’s not something we in this administration are advocating," he said.

His comments stood in contrast with those of another Bush administration appointee, Federal Deposit Insurance Corp. Chairman Sheila Bair, who has repeatedly warned that loan modification is moving too slowly and called for broad modifications by servicers of hybrid subprime adjustable-rate mortgages.

"We have this huge problem on our hands, and we can’t do this kind of case-by-case, laborious restructuring process with all these millions of loans," Ms. Bair said in a panel appearance Sept. 27. "I think some categorical approaches are needed. Just convert that mortgage into a fixed-rate mortgage, keep it at the starter rate, convert it into a fixed rate, make it permanent, and get on with it."

Mr. Paulson also cast cold water on efforts by Democratic lawmakers to pass legislation that would allow first lien mortgages to be reworked during the bankruptcy process. Such efforts have been gaining steam in recent days, with one bill approved last week by the administrative law subcommittee of the House Judiciary Committee.

"When you’re talking about bankruptcy and modifying contracts, then you’re dealing with something that may … very much impede future financing and a mortgage work that has been the envy of the rest of the world," he said. "So again we need to be careful in trying to help so we don’t end up doing something that’s counterproductive."

Though industry analysts and consumer groups have said the number of foreclosures is on the rise, Mr. Paulson said many borrowers are prepared to weather coming interest rate resets; he focused instead on outreach to struggling homeowners.

"Our best judgment is, just because there’s a reset doesn’t mean people aren’t going to be able to afford it," he said. "The majority of those people will be able to deal with the resets, and many are quite aware the resets are coming. That’s on the positive side … . We are not promising there is an answer to everyone, but there is certainly an answer for many. There are many people that can be helped, and that’s what the effort is."

He said many lenders are making needed modifications. "In my experience I … have seen that lenders are often going to make modifications in all terms because it makes more sense for them often to keep a homeowner in the home," he said.

Though Mr. Paulson’s counseling initiative was intended to signal the Bush administration is working to resolve issues in the subprime market, his comments touched off criticism from consumer advocates who said the Treasury chief appeared out of touch.

"What [Paulson’s] saying is not based in reality," said Bruce Marks, CEO of Neighborhood Assistance Corporation of America. "He’s clearly looking at mortgages in some part of the world, not in this country. The restructuring and modifications are not happening on scale."

Two recent studies have also concluded that modifications are not occurring on a large scale. On Wednesday, the California Reinvestment Coalition released a survey of 33 of the state’s more than 80 mortgage counseling agencies that found most borrowers being pushed into foreclosure or a short sale. The survey said 57% of counselors reported foreclosure and 33% reported short sale as the most common outcome for borrowers who cannot afford to pay their mortgages.

Last month, Moody’s Investors Service Inc. released a survey that found subprime mortgage servicers had modified only about 1% of loans that reset in January, April, and July.

George Miller, the executive director of the American Securitization Forum, who attended the Treasury event, said he had no reason to doubt the Moody’s analysis but said it was "an incomplete picture of the kinds of broader loss-mitigation activities that are taking place. If loan modification is the only measure of success in working with borrowers … , that’s probably too limiting a statistic."

Jonathan Kempner, the president and CEO of Mortgage Bankers Association, also said the Treasury plan should increase the number of loan modifications. Mr. Paulson’s plan focused on the formation of a partnership with 15 mortgage lenders representing 60% of mortgages, several mortgage counselors, investors, and trade organizations. Mr. Paulson said the group, Hope Now, was working to expand credit counseling to troubled borrowers, including a direct-mail campaign to encourage at-risk borrowers to call their mortgage servicer or a credit counselor.

"Everything is incremental, but this should give a real nice boost," Mr. Kempner said. "Things will be much better coordinated. There will be more attention."

Steve Bartlett, the president and chief executive of the Financial Services Roundtable, said counseling is an effective tool, and he said half the people reached for counseling via phone calls are getting help and able to stay in their homes.

"On a case-by-case basis we’ll work with each borrower to reset the terms to do whatever it takes that’s within reason that’s appropriate for the borrower to keep the borrower in their home," he said.

But even some bankers conceded current efforts are falling short. Michael Heid, a co-president of Wells Fargo Home Mortgage, noted that lenders, securitizers, GSEs, and HUD have acted to modify mortgages and to help struggling borrowers, but he still expressed frustration.

"Despite all of these efforts we have not been as successful as we believe we can be in getting consumers to respond to our outreach efforts," he said.

A recent report from Moody’s also cast doubt on the efficacy of a direct mail campaign to conduct outreach.

"Although some subprime servicers have recently begun to make outbound calls to borrowers that will experience reset in the near future, the majority of large servicers continue to rely on more passive, letter-based contact with borrowers," it said. "This is of particular concern given the potential size of the problem."

Others also said more steps are needed. Ellen Seidman, director of the Financial Services and Education Project at the New America Foundation and a former director of the Office of Thrift Supervision, said Treasury’s announcement fails to make an impact.

"As Sheila Bair pointed out last week and others have pointed out, doing [modifications] on a loan-by-loan basis is not going to work fast enough," she said. "We’ve got to do something other than - as someone put it - social work."

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