"We've been working very, very aggressively at helping" struggling homeowners, Paulson said. He cited a program the government announced last week in which borrowers with loans owned or guaranteed by mortgage giants Fannie Mae and Freddie Mac would get reduced interest rates or longer terms to make their payments more affordable.

Critics, including Bair, said that plan fell short of what is needed.

"It is nobody's view that we have been as successful as we need to be in reducing foreclosures," Frank told Paulson.

"I am going to keep working on this and looking at ways to use taxpayer money" appropriately, Paulson pledged.

Under the FDIC's new plan, the government would guarantee 2.2 million modified mortgages — mainly high-risk loans made to borrowers with weak credit or small down payments — through the end of 2009. The agency says the government's backing would make the lending industry more willing to modify home loans because taxpayers would absorb half the losses if the borrower defaults a second time.

Also, loan servicing companies, which collect and distribute mortgage payments, would be paid $1,000 for each loan they modify.

Even if a third of borrowers default again on their modified loans, 1.5 million homes would still be saved, the FDIC says. Under the agency's plan, monthly payments shouldn't total more than 31 percent of homeowners' pretax monthly income.