The Bush administration’s top housing policy official said a law to restructure government-backed lending is the quickest way to stem housing foreclosures, but he could support regulating the mortgage industry if the problems persist.

“I think we should let the free market work. But at the same time, we’ve let the free market work and look what’s happened,” Housing and Urban Development (HUD) Secretary Alphonso R. Jackson said Monday in a speech at the National Press Club.

One in 92 homes was in some stage of foreclosure last year. Jackson said he is “65 percent” in favor of tighter federal regulation but would increase his support for congressional action if the problem grows.

His comments come as congressional leaders remain split on how to address the growing foreclosures and as consumer advocates warn that the worst is yet to come. House Financial Services Chairman Barney Frank, D-Mass., has said he will draft a bill to protect borrowers, particularly those with subprime loans, from deceptive practices. However, Christopher J. Dodd, D-Conn., chairman of the Senate Banking, Housing and Urban Affairs Committee, favors a market-based approach without congressional intervention.

Jackson said the most important step for Congress is to pass a Federal Housing Administration (FHA) modernization bill, which would allow the majority of subprime borrowers at risk of foreclosure — hundreds of thousands of families — to remain in their homes through government-backed refinancing.

Subprime mortgages are pricier home loans offered to people with spotty or nonexistent credit histories.

“We think it is looking good,” Jackson said of quick passage for such a bill. “We think the subprime crisis has helped be an impetus for Congress to act.”

The House Financial Services panel approved legislation (HR 1852) in May that would make the changes Jackson wants — namely, raise loan limits for FHA-backed loans, boost loan limits in high-cost areas and allow the agency to vary the premiums it charges borrowers. A floor vote is possible before the August recess.

Dodd spokesman Marvin Fast said the senator “continues to work with HUD, consumer groups, industry and all interested parties to craft bipartisan legislation to modernize the FHA” and that Dodd will “continue to examine the best ways to address this.”

Meanwhile, the threat of foreclosure still looms as monthly payments on millions of adjustable loans will reset to higher interest rates over the next two years. Estimates from the nonprofit Center for Responsible Lending suggest that one in five subprime mortgages taken out during the past two years will end in foreclosure. Advocates of tougher regulations of the mortgage industry are confident the issue will push Jackson, and Congress, to act.

“All the forecasts are that we haven’t seen the bulk of” foreclosures, said Allen Fishbein, director of housing and credit policy at the Consumer Federation of America. “I think it’s going to become painfully obvious that the consumer protections aren’t adequate.”