In Australia, the government has shared refinancing risk on projects to allow short-term bank lending in the construction phase.

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Until recently, those bonds didn't face much risk from refinancing or repayment because they were troubled.

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Though the details are somewhat complicated, the plan essentially streamlines the loan modification and refinancing process for borrowers at risk.

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Mr Schneiderman said his office had documented hundreds of instances where Wells Fargo and Bank of America had failed to process refinancing requests from mortgage holders quickly enough, putting them at greater risk of foreclosure.

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Paulson tells Robert Siegel that the Treasury Department and Department of Housing and Urban Development will work with mortgage companies, financial counseling groups and other nonprofits to determine at-risk borrowers and contact them in advance to offer help refinancing.

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Another risk is if an investor buys a premium priced bond and the borrower prepays by refinancing or selling the home then the Note is paid back at par and the investor loses the premium.

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