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The secretary of the treasury is trying to reassure investors. Henry Paulson said yesterday that the U.S. will, quote, "work through" the problems of a turbulent credit market, quote, "just fine."

He also caution that there's no quick solution - a point underscored by more worrisome data on home foreclosures, as NPR's Scott Horsley reports.

SCOTT HORSLEY: Paulson said in an interview on CNBC that the administration is focused on homeowners at risk of losing their homes. There were almost twice as many foreclosure filings in July as there were a year ago.

Senate Finance Committee Chairman Chris Dodd held a private meeting with Paulson and Federal Reserve Chairman Ben Bernanke yesterday. The Democratic senator, who is running for president, said afterwards what's pushing many people out of their homes is adjustable mortgages that start with low monthly payments but quickly ratchet up.

Senator CHRISTOPHER DODD (Democrat, Connecticut): We may have as many as a million to three million people who could lose their homes - not because they lost their jobs, not because the economy collapsed, but because they got bad deals on mortgages.

HORSLEY: Dodd encouraged people who are facing foreclosure to call a national hotline run by NeighborWorks America - a non-profit group. Gabe del Rio says the group offers financial counseling to homeowners and tries to renegotiate more favorable mortgage terms.

Mr. GABE DEL RIO (NeighborWorks America): What we often shoot for in that negotiation is a fixed rate and stretching the term back out to 30 years, and that essentially provides a refinance product without actually going through a refinance.

HORSLEY: That's important because in areas where home prices have fallen, distressed owners may not qualify for a traditional refinancing. The Neighborhood Assistance Corporation of America is also offering 30-year mortgages with low fixed rates to borrowers who've been victims of predatory lenders.

CEO Bruce Marks says his non-profit group has access to $10 billion worth of loans, including $1 billion set aside for people at risk of foreclosure.

Mr. BRUCE MARKS (CEO, Neighborhood Assistance Corporation of America): That is a drop in a huge bucket. The problem is, it's the only drop right now. So our goal is to - not just to provide people with the opportunity to refinance, but to force the major lenders to restructure their loans to make it affordable.

HORSLEY: Senator Dodd said the government-sponsored agencies - Fannie Mae and Freddie Mac - could encourage more favorable loans to distressed borrowers, if the administration would relax restrictions on them. Secretary Paulson dismissed that idea, but said the administration is studying other ways to help troubled borrowers.

Dodd also said the government needs to look at some underlying problems with the credit market, including the role of credit rating agencies. Until recently, Moody's, Standard and Poor's, and other agencies gave top ratings to securities backed by home mortgages, even those that turned out to be at high risk of default.

Sen. DODD: These ratings were way, way off. But obviously there's an inherent problem. If the agencies are being paid by the very people they're rating, you have some legitimate underlying questions of how reliable those ratings can be.

HORSLEY: Rating agencies are paid by the Wall Street firms that bundle mortgages into securities for sale. Finance professor Joseph Mason of Drexel University says the rating agencies coached Wall Street on just how many risky mortgages they could pack in without jeopardizing their high credit rating.

Professor JOSEPH MASON (Drexel University): The builders of the securities wanted to push the envelope. And I would say that the credit rating agencies, in order to maintain business in a highly lucrative and fast-growing area, went along with the game.

HORSLEY: Those credit ratings turned out to be overly optimistic. And when more and more homeowners started defaulting on their mortgages, investors were caught off guard, setting the stage for today's credit backlash.

Professor Mason says while many investors rely on credit ratings, there are few objective standards. So a mortgage-backed security might boast the same high rating as a corporate bond, even though it carries up to 10 times the default risk. Mason says when rating agencies have that much leeway, it's little wonder they can be swayed by the people paying their fees.

Prof. MASON: Regulators don't seem to want to acknowledge that they've handed over this broad authority to the credit rating agencies. Now the credit rating agencies have responded to being handed that broad authority by selling it.

HORSLEY: Standard and Poor's declined to comment on the criticism, while Moody's did not return a call for comment. In recent weeks, the rating agencies have been steadily downgrading securities backed by high-risk mortgages, a move that critics say is too little too late.

Scott Horsley, NPR News.

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