Early details of the mortgage-rate-freeze plan
The AP reports (in a story you can find here):
The Bush administration has hammered out an agreement to freeze interest rates for certain subprime mortgages for five years to combat a soaring tide of foreclosures, congressional aides said Wednesday.The aides, who spoke on condition of anonymity because the details have not yet been released, said the five-year moratorium represented a compromise between desires by banking regulators for a longer time frame of up to seven years and mortgage industry arguments that the freeze should last only one or two years.
Another person familiar with the matter said the rate-freeze plan would apply to borrowers with loans made at the start of 2005 through July 30 of this year with rates that are scheduled to rise between Jan. 1, 2008, and July 31, 2010.
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Comments
I'm ok with this if something is thrown the way of the borrower who has paid on time regardless of the rate. How about adding another 50 points to my credit score?
Posted by: jeff | December 5, 2007 9:55 PM
If I understand the mortgages correctly, this will postpone but pretty much ensure that most of the home owners will end up in foreclosure. Each month they continue to pay the initial rate, the total mortgage amount will increase making it harder to refinance in the future. You end up paying more of your money to get to a foreclosure several years down the road. Short term thinking is what got us here; we need to start thinking long term for our children.
Posted by: Mel | December 6, 2007 8:20 AM
Mel,
You don't understand how this type of mortgage works. If these are "Option ARMs" and they are choosing to not pay the full amount owed, yes principal is being added every month. But if these are a standard ARM product, they are simply paying less in interest. As long as there is principal repayment each month, the loan size is decreasing.
Posted by: Mortgages | December 6, 2007 1:12 PM
For the children? Give me a break, there's always some sort of "crisis" that every generation goes through and the mantra " For The Children" is shouted from the mountain tops. And yes, I have children and I'm not depending on the govt so "save" them.
Posted by: Jeff | December 6, 2007 1:27 PM
The advantage to this proposal is that it is not a bailout at the expense of the taxpayer. I am not sympathetic to borrowers who find themselves in this position. In all cases the borrower has the responsiblity to understand his loan and what it will cost. I'm not in favor of bailing out people who have planned poorly or not planned at all with my tax dollars.
Posted by: laurie | December 6, 2007 2:29 PM