Most of the attention to the Paulson plan focuses on that final group. Those homeowners will be offered a deal: Keep making the monthly house payments, and the teaser rate will be extended for five years. No need to worry about the monthly payment jumping by hundreds of dollars. Well, not for five years.

FHA refinance plan
Less attention has been paid to that third group -- homeowners who can refinance. It's really the core group. Servicers will be expected to push these borrowers hard to refinance, preferably into a fixed-rate mortgage. This is where the federal government comes in.

In September, the Federal Housing Administration, or FHA, announced a loan program called FHASecure, for homeowners with marginal credit who have been late on a few house payments recently. Under FHASecure, some of these homeowners are eligible to refinance into FHA-insured, fixed-rate mortgages. Housing Secretary Alphonso Jackson says 35,000 people have refinanced under the FHASecure program since early September, and another 15,000 will do so by the end of this month.

Officials say about 1.8 million homeowners have subprime ARMs that will reset in 2008 and 2009. Of those, about 1.2 million will either be able to refinance or will be offered an extension of the teaser rate. No one offered an estimate of how those 1.2 million will be split up into each of those categories.

Qualifying for the rate freeze
The rate freezes will be offered to people whose subprime ARMs hit their first reset sometime between Jan. 1, 2008 and July 31, 2010. Most of these borrowers have loans with interest rates between 7 percent and 10 percent. That's substantially higher than current mortgage rates for people with good credit. This week, the benchmark 30-year fixed in Bankrate.com's weekly survey was at exactly 6 percent.

To be eligible for a five-year extension of the teaser rate, a borrower will have to be current on the monthly house payments, and not to have fallen behind by more than 60 days within the last year. In addition, the amount owed on the primary mortgage must be more than 97 percent of the home's value. Because home values have fallen, a lot of people will meet that criterion.

The Paulson plan encourages mortgage servicers to contact borrowers at least four months before the initial rate reset to warn about the higher payments and to discuss the options available. Servicers say that only half of borrowers respond to these overtures.

"It will create an easier process for the consumer once they contact their servicer," says Mike Hyde, an executive with Wells Fargo and vice chairman of the Housing Policy Council, which took part in the negotiations that yielded the Paulson plan.

Pick up the phone if it rings.