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: recast. But it will take time for firms to sort the loans in their portfolios into different risk buckets as a first step towards modifying them en masse, says Bill Rinehart of Ocwen, a servicer in Florida.

The trick is to root out both the basket-cases and also those who don’t need help. The best way to achieve this, reckons Mr Paulson, is through an industry-wide approach that sets out “relatively few, simple criteria” on who deserves a break.

Hence the strong Treasury backing for Hope Now, a wide-ranging alliance of consumer groups, servicers and investor groups, including the American Securitisation Forum (ASF). It has two main goals. The first is to reach borrowers who elude servicers acting on their own. Up to half of those struggling to pay ignore calls and letters, assuming that the reason for contact is to foreclose rather than negotiate.

More importantly, the alliance is working on principles governing who qualifies for loan alteration. Mr Paulson expects these to be unveiled before the end of the year. Unlike the Californian plan, they will extend to the one-third of subprime borrowers who took out fixed-rate mortgages. That will please those who see no reason why help should be offered only to those who took out unconventional loans.

Perhaps the biggest task will be to steer through complex securitisations. The ASF has moved swiftly to reinterpret the labyrinthine “pooling and servicing agreements” that govern the process in a way that makes systematic modification easier, says Steve Bailey of Countrywide, America’s largest mortgage lender.