Hank Paulson, US Treasury secretary, yesterday said “the worst is just beginning” for a wave of sub-prime mortgage resets as he unveiled an initiative with six private sector banks to delay home foreclosures. Financial Times

The initiative, called Project Lifeline, targets homeowners who are 90 days or more behind on their mortgage payments and offers them a 30-day 'pause' in the foreclosure process.

The plan comes amid increasing tension between the US administration and top Democrats over whether the private sector should continue to take the leading role in tackling mortgage workouts – loan renegotiations designed to avoid foreclosures – or whether there should be a more direct role for the federal government.

The announcement comes four months after the administration established the Hope Now alliance, its first response to stemming the rate of sub-prime mortgage resets faced by millions of distressed homeowners.