President Bush’s agreement with major U.S. financial institutions to freeze interest rates for up to five years on some mortgages to stem the tide of foreclosures drew mixed reactions yesterday from housing and industry advocates in Rhode Island, but on one point they agreed: the strategy fails to address the vast majority of troubled borrowers in the state who are facing foreclosure.

“It won’t help anybody who is in trouble now or faces foreclosure this winter,” Rhode Island Housing’s executive director, Richard H. Godfrey Jr., said. “We would rather see some short-term relief for people who are being put out of their homes now.”

“There is no perfect solution,” Mr. Bush said yesterday as he announced the deal hammered out with the mortgage industry. “The homeowners deserve our help. The steps I’ve outlined today are a sensible response to a serious challenge.”

The rate freeze would apply to adjustable-rate mortgages taken out between Jan. 1, 2005, and July 30, 2007, which are scheduled to increase in 2008 and 2009.

“It’s as if the market is hemorrhaging and this is a Band-Aid,” the head of Harvard University’s Joint Center for Housing Studies, Nicolas P. Retsinas, said. “It’s a good thing, but it doesn’t address a lot of the problems.”

U.S. Sen. Jack Reed called the rate cut “a step in the right direction, but it’s a long-delayed step and a very partial solution to a very complicated problem.”

Said Mr. Bush after meeting with industry leaders at the White House: “We should not bail out lenders, real estate speculators or those made the reckless decision to buy a home they knew they could never afford. But there are some responsible homeowners who could avoid foreclosure with some assistance.”

He said 1.2 million people could be eligible for help. But only a fraction will be subject to the rate freeze. Others would get assistance in refinancing with their lenders and getting loans secured by the Federal Housing Administration, Mr. Bush said.

Also, the aid will go only to those who ask for it, he said. Thousands of borrowers who are falling behind on their payments have been sent letters about the options, and Mr. Bush also urged people to call a new hot line: 1 (888) 995-HOPE.

The highest-profile part of the plan would freeze introductory “teaser” rates on certain subprime mortgages, preventing rates from rising for five years.

This offer would apply only to people living in their houses and who have not missed any payments at the lower rate. It would also apply only to loans taken out between 2005 and this past July 30 and scheduled to rise to higher rates in 2008 and 2009.

Meanwhile, the national Mortgage Bankers Association yesterday reported that foreclosures nationwide during the third quarter surged to their highest rate yet, and loan delinquencies in Rhode Island rose to the highest rate of any New England state.

The Rhode Island Mortgage Bankers Association president, Paul J. Cappello, said that rising foreclosures in the state were eroding real-estate values, making it harder for troubled borrowers to refinance out of high-rate loans.

“Somebody may have taken out a 95-percent or 100-percent loan-to-value mortgage a year or eight months ago,” Cappello said, “and right now they basically owe more than what the property is worth.”

Cappello, who is chairman of the credit committee at the Pawtucket Credit Union, said if the rate freeze stems the tide of foreclosures, it could prevent the further erosion of house values, which, in turn, could make it easier for borrowers to refinance.

Industry experts caution that most borrowers with adjustable-rate “subprime” mortgages, generally given to borrowers with blemished credit, will not qualify for the rate freeze. For example, people who have already fallen behind on their mortgage payments — which researchers at First American LoanPerformance say is about 22 percent of all subprime borrowers — would be ineligible.

“It doesn’t look like it helps people in an immediate crisis, (since) anyone who is delinquent with a mortgage isn’t eligible for the freeze,” said the Statewide Housing Action Network Coalition’s executive director Brenda J. Clement. Housing advocates and others also say that many homeowners who stand to benefit from the rate freeze are those with decent credit scores and steady incomes who probably would have qualified for refinancing anyway. (Reports by some analysts now say that more than a third of all subprime borrowers could have qualified for conventional, lower-rate loans.)

Mark M. Zandi, chief economist at Economy.com, in West Chester, Pa., said the rate freeze could help about 15 percent of the estimated 3.5 million borrowers — or 525,000 borrowers who would otherwise default on their mortgages.

“I think it makes a dent but a very small one,” he said. “It certainly doesn’t have a big enough impact to forestall the coming surge in credit problems and fallout on the financial system and broader economy.”

In Rhode Island, the delinquency rate on home mortgages during the third quarter climbed to 5.8 percent, compared with 5.3 percent in Massachusetts, according to the Mortgage Bankers Association. (The delinquency rate excludes loans in foreclosure.)

The percentage of subprime loans in Rhode Island in foreclosure during the same period was 9.7 percent, the report said.

But the government’s effort to intervene in the ailing credit market has also been criticized by some business people as having the potential to do more harm than good.

“It’s the government tinkering with private enterprise,” Rep. Doug Gablinske, D-Bristol, said. “It changes the (terms of) the agreement, and investors don’t take too kindly to that…. This may make them think twice in the future about securitizing mortgages. We’re already in a credit-crunch situation and this could exacerbate it.” Gablinske, who owns his own appraisal company, said he is feeling the pain of the real-estate downturn. In 2003, he said, he had 36 employees in three offices; now he has 5 employees in one office.

“When you’re in the real estate business,” he said, “you know it’s cyclical.”

With Associated Press reports

larditi@projo.com