On Thursday, four Democratic senators called on the Federal Housing Finance Agency, the regulator now in charge of Fannie Mae and Freddie Mac, to give some breathing room to defaulting borrowers by imposing a three-month moratorium on new foreclosures for loans owned by the companies. The Bush administration opposed calls for a similar moratorium by Senator Hillary Rodham Clinton earlier this year.
Mr. Paulson later persuaded some big lenders to give delinquent borrowers an extra month to negotiate modification or repayment plans before seeking foreclosure. As they prepare to go large-scale, regulators have been keeping an eye on how the Federal Deposit Insurance Corporation, which oversees failed banks, does things. The agency has taken several steps to make it easier for struggling borrowers to repay their mortgages and stay in their homes.
Last month, it began offering 25,000 customers of IndyMac Bank — which became one of the largest failed financial institutions in American history — lower-priced, fixed-rate loans if the borrower could afford to make payments. It offered to trim interest rates on loans to as little as 3 percent in some cases, and gave a number of borrowers up to 40 years for repayment.
Sheila C. Bair, the chairman, has been one of the most vocal proponents of wide-scale loan modifications since last year, when defaults on mortgages started rising sharply. A spokesman for Ms. Bair, Andrew Gray, said the efforts were still in the early stages, but the F.D.I.C. had been pleased with the results so far.
But the challenges for Fannie Mae, Freddie Mac and their regulators are on a different plane. How the Federal Housing Finance Agency decides to approach loan modification will have ripple effects through the economy, because the two companies together own or guarantee nearly half of all loans outstanding.
The director of the F.H.F.A., James B. Lockhart, has said he wants the two companies to be “creative and aggressive” in modifying loans, but he has not offered or endorsed any specific plans since he took their reins.
For the moment, only a small faction of loans controlled by the companies are delinquent or in foreclosure. But defaults have been rising fast, especially among a category of loans known as Alt-A, which are riskier than conventional prime loans. Many of these did not require borrowers to provide proof of their incomes and assets.
Before the government seized them, Fannie Mae and Freddie Mac had already advanced their efforts to modify loans. In July, the companies said they would pay the mortgage servicing companies that deal with borrowers on their behalf a double bonus to help arrange loan modifications. Fannie Mae has also been making personal loans to help borrowers with temporary financial problems catch up with past-due payments.
The government has, of course, overseen large programs for delinquent mortgages before. In the banking crisis that struck the economy in 1980, the F.D.I.C. and later the Resolution Trust Corporation took over many failed banks and savings and loans. But that is where the comparison ends: most of the problems then were concentrated among a relatively small number of commercial mortgages. It will be harder to deal with millions of home loans, said William M. Isaac, a former chairman of the F.D.I.C.
“When I make a judgment about commercial loans,” Mr. Isaac said, “it’s just a handful of commercial loans.” He says he believes the government will need to impose general rules and monitor how mortgage companies apply them to borrowers.
To make matters worse, a large number of mortgages made during the recent housing boom are unsalvageable because borrowers cannot afford even the terms of modified loans. Many of these will default yet again after they are altered, said Bert Ely, a financial consultant who has been critical of the F.D.I.C. modification plan.
“If you do a bunch of mass modifications with borrowers who still can’t handle the modified loans for any number of reasons, all you have done is rolled the foreclosure into the future,” Mr. Ely said.