Bush to Outline 5-Year Rate Freeze Plan: Sources

By Patrick Rucker and John Poirier 43 minutes ago

President George W. Bush is expected to outline on Thursday a plan to freeze mortgage rates for five years for many U.S. homeowners facing sharp increases in their monthly payments, industry sources said on Wednesday.

Final details of the plan are still being worked out after the American Securitization Forum, a trade group that represents large mortgage investors, presented its framework for implementing a broad rate freeze to the Treasury Department late on Tuesday, the sources said.

The sources, who are familiar with details of the trade group's pitch, said the plan envisions covering subprime loans originated between January 1, 2005, and July 31, 2007, with rates that are due to reset between January 1, 2008, and June or July of 2010.

An estimated 1.8 million U.S. homeowners face pricey rate resets next year alone, the Federal Reserve has said. Officials fear half a million borrowers risk losing their homes.

The plan is primarily aimed at borrowers who can afford their existing rates and who are current on their payments, but who would face default when the rate resets at a higher level.

Under the plan, homeowners who have shown they are a reasonable credit risk but who could not afford their homes with higher rates would qualify for "fast-tracked" loan modification and a five-year interest rate freeze.

Borrowers who have struggled to keep up their loan payments could still qualify for the freeze, but would face more scrutiny before receiving any loan modification.

Treasury Secretary Henry Paulson has worked closely with the American Securitization Forum, mortgage servicers and lenders to hammer out a comprehensive plan to modify troubled loans.

(Reporting by Patrick Rucker and John Poirier; Editing by Chizu Nomiyama)

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I'm really not sure how I feel about this. On the one hand, I understand that a huge crisis like this can have a big impact on the economy, but on the other, why should people who make bad financial decisions have the government come to the rescue and bail them out? I have exceptional credit, and recently after my divorce I was able to secure a re-finance on my home with a 30-year fixed mortgage at 6.25%, which was about as good as it was getting at the time.

So now, someone who bought a house they couldn't afford using an ARM gets to keep their low rate for the next five years? That's BS to me. Thoughts?

This makes me so mad...

Fuck...

Expand upon your thoughts LW.

answer, put LENDERS, who authorize these stupid ridiculous bullshit loans to people who OBVIOUSLY cannot afford them IN PRISON!

5 years only postpones the crisis. This is more about a society that is not afraid at all of massive debt.

What they should do is help people sell thier properties or make these bad mortgage houses buy them back from the customers.

If you make 35 grand a year... you can't afford a $350,000 house unless you go find a job that pays a lot more money.

My issue with subprime is this... they are directly targeting people who obviously have credit problems and acting like they are doing them a favor giving them a huge loan to buy a house when no one else will do it. Sure it's a new market...... the construction industry gets to build more crappy houses.... but then they get forclosed on in 3 years when the ARM goes up... provided they do keep up the payments.

I probably wouldn't qualify for this, so BOOOOOO!!!!

Yup. This is not a solution to the problem its just putting it on the back burner

Agreed. 5 years on a 30 year morgage is nothing.

Why would you put the lenders in jail? The people who did this stupid ass shit are just as guilty as the lender. And the lenders are getting hurt just as bad as the homeowners.

I am against this because it takes away personal responsibility. These lenders got themselves into this mess, they can get themselves out and deal with the consequences of their actions. The people that bought into this stupid shit got themselves into it. It's no business of the government to be freezing interest rates, or bailing these jackasses out. All this is gonna do is foster MORE BAD LENDING AND BORROWING! And when Hillary gets elected, she's gonna be a lot more progressive than Bush in regards to bailing out these unfortunate home owners that are losing their homes.

in a twisted way, i'm almost relieved to see that you will complain about a bad idea even if its bush or republicans that came up with it.

This is almost identical to the plan she called for about 3 days ago.

Well, it's not like it was her idea. Thess negotiations with the major lenders have been going on for weeks.

Right. She was obviously trying to look like she was somehow involved in getting this done. I'm just not sure how much more aggressive she would get than this plan though.

And in my opinion, the real issue here, which LW touched on earlier I think, is that this once again reassures banks and lenders that they can do whatever they like, take whatever risks they desire, because if they step in it the government is right there to make sure they don't get too dirty. All under the guise of helping out the poor homeowner victims.

That sounds about right.

What's the price tag on Bush's plan?

Hillary was going to outright bail these people out in August. She had a 2 billion dollar (maybe only a billion?) plan that she was proposing to cow-tow down to her shameless, ignorant base of union workers, anti-war code pinkers, and jaded college liberal hippies looking to get dope legalized.

The fault lies on both sides, but I tend to blame the bank. The homeowners because they allowed themselves to be talking into these loans. The banks because they took advantage.

A LARGE percentage of these homeowners are young couples, on their first homes. They were no doubt very naive, and I have no doubt that the lenders took advantage. My mom refinanced a few years ago - she didn't get one of these loans, but they REALLY did put the pressure on her. I could understand a young couple looking to start a new life together getting excited and caught up in what the lenders were pushing.

As far as the banks go, they can suck it for all I care. The banks are losing money because they took advantage of people who were in over their heads. The homeowners, however stupid or whatever bad decisions they made - are entitiled to a tad bit of help. Can we really just throw so many families out onto the streets because of it?

Something should be done to regulate these loans.

Agreed, I'm just assuming the lenders.....should freaking know better. This is taking advantage of people who have a history of either bad decisions or bad "luck" Then the glossy loan salesman comes in and says....hey, check out this ARM...now you can afford this home...no problem....

I definately don't want to get to the point where people are required to buy homes, and insurance and food etc from the great government provider of all and have no choices anymore.

Its a never ending cycle. The banks screw people over-the people fall on hard times and cant get loans-banks piss and moan that they are losing money-goverment comes to bail out the bank-repeat.

why can't these people just refinance and get a fixed rate mortgage? why does the gov't need to get involved?

Just to play devil's advocate, because I think it probably is a bad idea for the gov't to get involved here, if you got a 3 yr ARM 2 years ago, your initial rate may have been as low as 5.5%. A 30 yr fixed today is at what, 7%? And this is assuming the people had decent but not great credit. If their credit was bad, who knows what their ARM rates were, and they might not be able to get a 30 yr fixed AT ALL today. When I was closing loans back in 2003-2004, I saw some 2 and 3 year ARMs that had initial rates as high as 9%, and this was when a person with good credit could get a 30 yr fixed for around 5.5%. Those people had no business buying homes, and the lenders had no business lending them money.

The worst pimps in this whole thing though are independent mortgage brokers. The worst, most disgusting group of people I've ever dealt with, and I'm a lawyer. They just wanted to push loans through and get their commissions. What happened to their clients after that was irrelevant to them. They'd LIE TO THE LENDERS to get the loans pushed through, so the lenders didn't even know how big of a risk they were taking.

Of course now, several years later, those people are out of the picture and and you have two groups who are less to blame then them (if not innocent) bearing all of the burden of their crooked practices.

I work in the mortgage processing centre for one of Australia's largest banks and you're 100% correct about independent brokers, pd: a bunch of slimeballs if I ever saw 'em.

They're a nightmare to deal with...