In announcing new efforts to ensure that small banks have the capital needed to weather the current storm, Treasury Secretary Tim Geithner said the financial system is beginning to heal, but that recovery will take time.

Speaking before the Independent Community Bankers of America, Geithner said the application window for smaller banks to access funds through the Capital Purchase Program would be extended by six months.

“Using the proceeds of the repayments we expect to receive from some of the largest banks, we plan to re-open the application window for banks with total assets under $500 million under the Capital Purchase Program, and raise from 3% of risk-weighted assets to 5% the amount for which qualifying institutions can apply,” Geithner said. 

Speaking about the housing market, Geithner said interest rates on a 30-mortgage have dropped to “an historic low," while refinancing has surged, helping the broader economy begin to recover.

“The financial system is starting to heal,” he said. “Concern about systemic risk has diminished.  And overall lending conditions have started to improve.” 

Geithner said there were many “welcome signs” in the economy, but he struck a cautious tone looking forward. “The process of financial recovery and repair is going to take time,” he said.

Earlier on Wednesday, the Mortgage Bankers Association said weekly loan applications fell 8.6% for the week ending May 8, despite the 30-year fixed-rate mortgage decreasing to 4.76% from 4.79%.