How do you feel about this? "Subprime help: Some loan rates to be frozen"

WASHINGTON — Homeowners with certain subprime loans will benefit from a five-year freeze in their interest rates, under a plan the Bush administration will unveil Thursday, according to people with knowledge of the deal that's being forged with the mortgage industry.

The plan is intended to ease the threat to the economy from the cascading number of foreclosures among subprime borrowers. The Treasury Department estimates that the plan could grant financial relief to hundreds of thousands of homeowners.

U.S. officials have been negotiating the voluntary deal with lenders, mortgage servicing firms and other companies. The sources who disclosed details of the plan were not authorized to speak on the record before the official announcement.

Treasury Secretary Henry Paulson has insisted that taxpayer money will not be used in the deal. Rather, investors who bought mortgage-backed securities that included subprime loans, expecting a high return, will bear the brunt.

The plan covers only subprime adjustable-rate loans issued from January 2005 to mid-2007 that will reset to higher rates starting next year through mid-2010. To qualify, borrowers must live in their home but be unable to afford their payments once they rise. They must also have less than 3% equity in the home, according to the Mortgage Bankers Association, which took part in the negotiations.
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Nearly 17% of subprime borrowers were at least one payment behind in the first quarter of this year, and few, if any of them, will qualify for the plan.

The plan emerged from talks between Paulson and other banking regulators and banks, mortgage investors and consumer groups trying to address an avalanche of feared foreclosures as an estimated 2 million subprime mortgages reset from lower introductory "teaser" rates to higher rates.

In many cases, the higher rates will boost monthly payments by as much as 30%, making it very difficult for many people to keep current with their loans. The plan is aimed at homeowners who are making payments on time at lower introductory mortgage rates but cannot afford a higher adjusted rate.

The restrictions, especially the lack of aid for homeowners who recently lost homes or who are now in foreclosure, drew criticism from some consumer advocates. The planned freeze on interest rates on various subprime loans doesn't help the vast majority of those hurt by the crisis, says Maude Hurd, president of the Association of Community Organizations for Reform Now, which represents low- and moderate-income families.

Paulson's proposal also received a mixed reception from some lawmakers, who are concerned that the government is getting too deeply involved in the marketplace, or that bondholders will oppose the deal.

"The $64,000 question," said Sen. Charles Schumer, D-N.Y., is "will investors who might balk at this be able to maintain legal roadblocks and prevent the plan from going into effect?"

source

Re: How do you feel about this? "Subprime help: Some loan rates to be frozen"

I think it is pointless! People knew what they were getting into when they signed on for these mortgages. Bail them out now, and what happens the next time? And we wonder why society is the way it is!

I will say, I would be livid if taxpayer money was being used for this. No way should I be paying for someone else's stupidity.

Message edited 12/6/2007 12:46:21 PM.

Re: How do you feel about this? "Subprime help: Some loan rates to be frozen"

Message edited 12/6/2007 12:52:25 PM.

Re: How do you feel about this? "Subprime help: Some loan rates to be frozen"

Message edited 9/1/2009 12:41:29 PM.

Re: How do you feel about this? "Subprime help: Some loan rates to be frozen"

Re: How do you feel about this? "Subprime help: Some loan rates to be frozen"

Message edited 9/1/2009 12:40:41 PM.

Re: How do you feel about this? "Subprime help: Some loan rates to be frozen"

I feel that some of these people need help but it is only going to help those that meet those specific guidelines as stated in the report above. I also think that the homeowner is going to have to seek the help and the mortgage companies are not going to do anythign to tell someone they qualify.

I do think it will help the housing market stay where it is or maybe even go down a little more before it goes back up. My concern is if the gov't doesn't step in as they are and come up with something (and I agree our tax dollars shouldn't help them--and I understand that this plan doesn't) then the housing economy will tank--a foreclosure on someones block is not nice to look at and can negatively effect your property value and I wouldn't want to see anyone out on the street even if they understood at the time what they were gettng themselves into. I think alot of people thought that the interest rates would still be low in a few years OR the could refinance and get a fixed rate which is what alot of people were told by brokers. They are now finding themselves with no equity in their homes, they can't sell them to get out or their credit hasn't improved that much to have them qualify for a fixed rate.

It may be rewarding bad decisions in some way but it isn't like they won't be paying their mortgage their mortgage is just not going to readjust when it was suppose to and shoot up to 10%. I agree these people made bad decisions but I think some of them made bad decisions because they had no choice (or at least that is how they felt).

Message edited 12/6/2007 1:04:33 PM.

Re: How do you feel about this? "Subprime help: Some loan rates to be frozen"

As an economist, this is an awful, awful thing. Markets shouldn't be messed with by government intervention. As I have said before, people foreclosing on houses because they got into a situation they couldn't originally afford is the natural way this will correct itself.

As a recent homebuyer, however, I love it, and hope that it keeps house prices high

Re: How do you feel about this? "Subprime help: Some loan rates to be frozen"

my opinion - the homeowners seemingly bear no responsibility for their actions. I agree that many brokers and lenders are sleazy and will do anything to make a buck. but the homebuyers sign all the documents and IMO, this is the biggest purchase a person makes. it is ridiculous to assume you can afford a an $800K house when you earn less than $100K per year. which is exactly what some people in Massapequa did - it was in the Sunday Newsday a few weeks ago (the cover story). so these people should be bailed out for not researching inflated property values and agreeing to have their broker LIE on their behalf?

Re: How do you feel about this? "Subprime help: Some loan rates to be frozen"

Re: How do you feel about this? "Subprime help: Some loan rates to be frozen"

Re: How do you feel about this? "Subprime help: Some loan rates to be frozen"

I'd like to know when I'm going to get assistance from the government for struggling to be middle class, doing the proper research before getting a mortgage & buying a house, trying to find safe affordable day care etc....

Re: How do you feel about this? "Subprime help: Some loan rates to be frozen"

honestly--this is such a tough situation.

i do income taxes--and i have a lot of clients that are immigrants as well as americans who barely scrape by. and i think the sub-prime mess is mix of both the poor judgement and sometimes education of those buying these homes---mixed with the greedy mortgage companies. i have seen so many ppl who i swear, can barely read and write (as well as don't even speak the language) come in with their mortgage statements on home....and tell me how they are just barely getting by cause they are renting out every freaking room cause they never really fully understood how much their mortgage was going to be each month. at the closing they are told "sign here...sign there" and don't know what they are doing.

sooooo many of the sub prime mortgage companies lie on the forms and put bogus salary information to get the loans for ppl--and while yes, i do understand that the home buy MUST sign and approve this---keep in mind that uneducated ppl as well as those who do not speak english---sometimes just do not know what they are doing and put their trust in the mortgage companies.

as for this current situation--i don't really know how it will work out--but it truly is sad how these ppl are misinformed when they purchase these homes and taken advantage of. not everyone falls into this catetgory---but MANY do....and then regular middle class ppl have to bail them out!

Message edited 12/6/2007 2:01:57 PM.

Re: How do you feel about this? "Subprime help: Some loan rates to be frozen"

Posted by longford73

I'd like to know when I'm going to get assistance from the government for struggling to be middle class, doing the proper research before getting a mortgage & buying a house, trying to find safe affordable day care etc....

Re: How do you feel about this? "Subprime help: Some loan rates to be frozen"

Also, I understand that some brokers are sleazy and lie, and that some buyers are uneducated or don't speak English, etc. But I just feel like that's not a good enough excuse. I mean, I am totally stupid when it comes to the stock market and making investments. If I rely on financial advice from a broker and my investments go sour, am I entitled to a refund due to my ignorance? No, I am not.

Re: How do you feel about this? "Subprime help: Some loan rates to be frozen"

Re: How do you feel about this? "Subprime help: Some loan rates to be frozen"

Re: How do you feel about this? "Subprime help: Some loan rates to be frozen"

While I'm still not sure where I stand on this, I really don't think the government is thinking, "Gee, these poor, stupid fools will never learn. Let's bail them out!" It's not that simple. I think they are attempting to avoid a catastrophic blow to the housing and mortgage lending markets and the economy as a whole. That affects all of us, not just the people who would seemingly benefit from this program.

I venture to say that if things got terribly worse and the economy got even worse, people would be wanting to know why the government isn't stepping in or why no one tried to prevent it... Damned if you do and damned if you don't sometimes...

I'm still not sure where I stand. I'm generally very Darwinian and very free-market / anti-regulation in a lot of ways, but I'm on the fence about this. Doing something to avoid a major blow to the economy that will hurt almost everyone doesn't bother me so much - I'm more concerned with whether or not it will actually help that much.

ETF typo

Message edited 12/6/2007 2:42:49 PM.

Re: How do you feel about this? "Subprime help: Some loan rates to be frozen"

Re: How do you feel about this? "Subprime help: Some loan rates to be frozen"

Re: How do you feel about this? "Subprime help: Some loan rates to be frozen"

Posted by longford73

I'd like to know when I'm going to get assistance from the government for struggling to be middle class, doing the proper research before getting a mortgage & buying a house, trying to find safe affordable day care etc....

Re: How do you feel about this? "Subprime help: Some loan rates to be frozen"

Re: How do you feel about this? "Subprime help: Some loan rates to be frozen"