by Calculated Risk on 11/20/2007 11:13:00 PM

Form the WSJ: Paulson Shifts on Mortgages

In an interview, Mr. Paulson said the number of potential home-loan defaults "will be significantly bigger" in 2008 than in 2007. He said he is "aggressively encouraging" the mortgage-service industry -- which collects loan payments from borrowers -- to develop criteria that would enable large groups of borrowers who might default on their payments to qualify for loans with better terms.

"We're never going to be able to process the number of workouts and modifications that are going to be necessary doing it just sort of one-off," Mr. Paulson said. "I've talked to enough people now to know there's no way that's going to work."
...
While he stopped short of endorsing a proposal by Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., to have mortgage companies freeze the interest rate on the two million mortgages due to reset to higher rates between now and the end of 2008, he said that's "one idea." Mr. Paulson said he supports finding some way to develop "standard criteria that's going to allow for modification and workouts."

It's true that Paulson has come a long way in a few months:

"In terms of looking at housing, most of us believe that it's at or near the bottom."
Henry Paulson, July 2, 2007

"All the signs I look at" show "the housing market is at or near the bottom."
Henry Paulson, April 20, 2007

My point isn't to embarrass Paulson, but to show how far behind the curve he has been on housing and the credit crunch. If modification standards are a good idea, he shouldn't be talking about standards, he should be proposing standards. At least he realizes that housing in 2008 is going to be much worse than 2007.