Treasury Secretary Paulson indicated the Bush administration is willing to consider congressional plans to stem foreclosures by expanding government guarantees for mortgages.

“I think you will continue to see flexibility as we learn and go forward,” Mr. Paulson said in an interview with Bloomberg Television in Beijing. He spoke after meetings with President Hu Jintao and Vice Premier Wang Qishan of China, and praised them for making “very material progress” in allowing China’s currency to appreciate.

Mr. Paulson’s housing comments are a shift from last month, when he said proposals to use government funds were a “nonstarter” and played down concern about homeowners whose houses are worth less than what they owe on their mortgages. The chairman of the House Financial Services Committee, Barney Frank, said yesterday that officials are warming to his plan to widen mortgage guarantees.

Foreclosures jumped 60% in February after reaching a record rate in the fourth quarter of 2007. Rising defaults on subprime mortgages have roiled global financial markets and worsened the housing slump in America, threatening the first contraction in the economy since 2001. Chairman Bernanke said yesterday the economy may shrink in the first half of the year, and that a recession is possible. The International Monetary Fund today cut its forecast for global growth this year and said there’s a 25% chance of a world recession, citing the worst financial crisis in the U.S. since the Great Depression.

Mr. Paulson said he told Chinese officials that the American economy is having “a very difficult quarter” and has “slowed down sharply.” Still, he added that the IMF report “sounds a little overblown to me.”