Borrowers may benefit from mortgage relief plans
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Instead, he said lenders and servicers needed to develop an "industry-wide solution" that would identify which borrowers were eligible for appropriate modifications and refinancings, and he sketched an outline of four categories:

"There are those who can afford their adjusted interest rate; these homeowners need no assistance. There are also a substantial number of homeowners who haven't been making payments at the starter rate on their subprime loan and may not have the financial wherewithal to sustain home ownership; some of these homeowners will become renters again. A third category of homeowners might choose to refinance their mortgage … and the fourth category is those with steady incomes and relatively clean payment histories who could afford the lower introductory mortgage rate but cannot afford the higher adjusted rate. We are focusing on this group, determining who they are and what steps may appropriately assist them."

Four types of homeowners:

1. Those who can afford their ARMs and payments 2. Those who won't be able to continue to be homeowners 3. Those who want to refinance 4. Those who could afford "teaser" rate but not reset rate

Paulson didn't define subprime loans, explain who would qualify for that fourth category or outline the steps that might be taken to aid those homeowners. Additional qualifications, which conceivably could include positive home equity, a maximum debt-to-income ratio, a minimum credit score or other criteria, could further limit the number of people who would benefit.

Still many unknowns
The mechanics of the proposed interest rate freeze are also shrouded in mystery. At this time, no one knows which subprime ARMs would be eligible, how the frozen rates would be determined, how long the rates would be frozen or whether the unpaid interest would be added to the homeowner's loan balance.

The timing of the proposals is also unknown. Paulson said he expects servicers to implement the industry-wide categories "quickly," but he also said the issues are complex and "will take time" to resolve.

Lenders have been equally reticent about the details of these discussions. Terry Francisco, a spokesman for Bank of America, says it is "unlikely" that the interest rate freeze would include any of the bank's customers because the "vast majority" of loans in the bank's portfolio are fixed-rate loans or ARMs that have a fixed rate for the first five or seven years.

HSBC was "not aware of the details of this program, but is in discussions to learn more," wrote spokeswoman Kate Durham in an e-mail.

Mark Rodgers, a spokesman for Citigroup, referred questions about the freeze to The Financial Services Roundtable, an association of major financial services companies.