US President George W. Bush acknowledged "some unsettling times" in the US' troubled housing and credit markets, while Federal Reserve Chairman Ben Bernanke offered fresh assurances steps would be taken to curb the fallout.
The housing slump, the worst in 16 years, is likely to drag on well into next year, when the nation will be voting for a new president.
Home foreclosures -- now at record highs -- and delinquencies are likely to get worse, Bernanke told the House Financial Services Committee on Thursday.
The Fed, the Bush administration and Capitol Hill are scrambling to provide relief.
Proposals in Congress would expand the federal backing for mortgages.
The House on Tuesday passed legislation that would give more leeway to the Federal Housing Administration (FHA), which insures mortgages for low and middle-income borrowers. The Senate has its own bill.
The administration, meanwhile, is working with the FHA to help squeezed homeowners.
Bush said at a White House news conference on Thursday "there is no question" these are "some unsettling times" in the housing and credit markets.
"That's why I look forward to working with Congress to modernize the FHA loans so that people can refinance their homes," he said.
Treasury Secretary Henry Paulson, who also appeared at the House hearing, signaled that the administration would consider allowing mortgage giants Fannie Mae and Freddie Mac to temporarily buy, bundle and sell as securities any loans exceeding US$417,000.
The idea, which represents a policy change for the administration, is portrayed as an important way to pump cash into the jumbo loan market, which has been hard hit by the credit crunch.
The top executives at Freddie Mac and Fannie Mae testified that they stood ready to help cushion the shocks from a rising flood of mortgage foreclosures.
"I am confident we could provide more liquidity help to the home finance market today without taking risks we are not capable of managing," head of Fannie Mae Daniel Mudd said.
Freddie Mac chief Richard Syron said: "We remain very dedicated to helping borrowers avoid foreclosures."
Panel chairman Representative Barney Frank, supports giving more leeway to the FHA as well as to Fannie Mae and Freddie Mac.
The Federal Reserve is conducting a thorough review of possible actions to help consumers and would-be homeowners and prevent problems from happening again in the future.
"We are committed to preventing problems from recurring," Bernanke said.
The Fed also is considering new rules in several areas, including restrictions on loans that don't require proof of a borrower's income and limitations on financial penalties for borrowers who make early payments.
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