Paulson sees mortgage plan before week's end

WASHINGTON (Reuters) - Treasury Secretary Henry Paulson said on Monday he hoped to hammer out a mortgage relief plan to aid troubled borrowers within days.

"I am optimistic that we're going to have something to announce before the end of the week," Paulson told Bloomberg Television in an interview.

Paulson earlier said the Treasury was close to brokering a mortgage aid plan to help troubled borrowers avoid losing their homes through foreclosure.

Problems in the subprime market for borrowers with risky credit have spilled into the wider housing market, hitting home prices while hoisting refinancing costs for borrowers with adjustable rate mortgages. This is harming the wider economy.

But Paulson warned that the initiative would not solve the problems alone, and also required steps from lawmakers to modernize the Federal Housing Administration and government sponsored enterprises like Freddie Mac and Fannie Mae.

"This is not a silver bullet. This plan, in and of itself, is not going to deal with all of the problems associated with the housing market and bad lending practices," he said.

On the other hand, Paulson emphasized that the U.S. economy would continue expanding despite problems in housing, helped by a buoyant world economy and its own intrinsic strength.

"We have a fundamentally sound, healthy economy and I believe it is going to keep growing," he said, while reiterating "a strong dollar is in our nation's interest."

"Our economy goes through its ups and downs but I believe our economy is going to continue to grow and its fundamental strength is going to be reflected in the currency markets," he said.

The dollar has notched record lows against the euro and pound since subprime problems provoked a global credit crunch in August.

(Reporting by Alister Bull; Editing by Andrea Ricci)