Bush to Outline 5 - Year Rate Freeze Plan: Sources
By REUTERS
nytimes.com
( W's got to be desperate to avoid financial collapse - too much like Poppy! What's suddenly wrong with Mr. Market? )
Filed at 12:03 p.m. ET
WASHINGTON (Reuters) - 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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