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Bush Says Administration Working to Solve Subprime Mortgage Problems


President Bush says the U.S. economy is on a solid footing, but admits recent turmoil in the housing and credit markets is creating "headwinds" for growth.

During a nationally televised news conference Tuesday Mr. Bush said his administration is working on the mortgage issue, but he is reluctant to bail out lenders.

Administration officials have expressed concern that a wave of foreclosures could worsen the housing slump and increase chances the economy will fall into recession.

Monday, Treasury Secretary Henry Paulson said officials are negotiating with banks and others seeking a deal to ease the subprime crisis. The proposed agreement might keep interest rates from rising on subprime mortgages for a while, but the length of time is said to be a key point of discussion.

Over the past several years, banks have increased the number of mortgage loans to "subprime" borrowers with poor credit. In about two million cases, borrowers got low interest rates for the first couple of years. But the deal also allows lenders to boost interest rates and the monthly mortgage payments when the low "teaser" rate expires. Higher payments are boosting the number of borrowers who cannot repay their loans.

Economists calculate that about 100,000 borrowers face interest rate "resets" each month for the next two years.