WASHINGTON — The recent turmoil in the housing credit and mortgage markets is "far from over," a high-ranking government official warned federal lawmakers Wednesday.

A strong economy has helped mute some of the effect of what analysts are describing as the worst housing slump in 16 years, said Robert K. Steel, the Treasury Department's undersecretary for domestic finance.

Still, "it will take more time to play out, and certain segments of the capital markets are stressed," Steel said in testimony before the House Financial Services Committee.

The congressional panel is examining what went wrong, particularly in the subprime market. Subprime mortgages are risky loans that are typically made to people with bad credit histories.

Such loans made homeownership possible for people who otherwise would not be able to afford to buy. Yet the loans come with a number of pitfalls, such as adjustable mortgage rates, which start out low then reset to higher rates in a few years.

The higher rates, combined with a decline in home price appreciation, has led to an increase in late payments, default notices and foreclosures among subprime borrowers.

The problem is expected to worsen: Some $353 billion in subprime mortgages are expected to reset at higher rates by the end of next year.

House Democrats said the upheaval may point out the need for greater government scrutiny of the mortgage industry.

The regulatory structure for financial markets is the same as 10 years ago, even though the lenders themselves are different and are offering innovative new mortgages, said Massachusetts Democrat Barney Frank, chairman of the Financial Services Committee.

"There is a consensus that regulation in the mortgage market has not kept up with innovation," Frank said.

Frank and other lawmakers have been particularly concerned about the role credit-rating firms, such as Standard & Poors and Moody's Investors Service, may have played in the upheaval.

Critics charge that the credit-rating agencies declared mortgage-backed securities to be safe investments and failed to downgrade their favorable ratings until the securities' losses were already well known.

Still, Republicans warned that lawmakers should not overreact.

The vast majority of mortgage holders are not experiencing a problem, said the committee's top Republican, Rep. Spencer Bachus of Alabama.

The problems that are occurring are the result of lenders pushing the limits and making loans that should not have been approved, he said.

Some loans, for example, were made to borrowers who did not have steady wages, while others were approved without confirming the borrower's income.

"We should not rush out and change a market, a market that is working well," Bachus said.

"We should not panic," he said. "We need to take a measured approach."

Last week, the Bush administration outlined a number of steps it is taking to help troubled homebuyers remain in their homes and avoid foreclosure.

The Federal Housing Administration is expected to launch a program that would allow homeowners who have good credit histories but cannot afford their current mortgage payments to refinance into mortgages insured by the FHA.

Other government initiatives include revising a key housing provision of the federal tax code so that it will be easier for homeowners to refinance their mortgages.

Frank said the House committee would examine the administration's proposals at a separate hearing set for Sept. 20.