PRESIDENT BUSH, TREASURY SECRETARY PAULSON ROLLOUT SUB-PRIME RATE FREEZE PLAN
PLAN COULD HELP IN EXCESS OF TWO MILLION BORROWERS
It is expected that over 1.5 million adjustable-rate mortgage loans, many with special low introductory, or "teaser" rates, will reset to far-higher interest rates in 2008. Many borrowers with sub-prime home loans, at above-market interest rates, will see their monthly mortgage payments increase by several hundred dollars each month. (See our BlogChicagoHomes,com post of November 30, 2007 for more details, as well as this article from reporter Damian Paletta in today's Wall Street Journal.)
In a new program announced today by President Bush, along with U.S. Treasury Secretary Henry Paulson, lower, introductory mortgage rates for certain borrowers would be frozen for five years. Although not binding, the initiative would add flexibility to loan servicers adminstering many adjustable rate mortgages - stalling rate increases could potentially forestall thousands of possible foreclosures.
The measure has encountered resistance from many Wall Street investment firms, who purchased large blocks of sub-prime loans within the last couple of years, and now would potentially lose millions of dollars in due loan interest.
Bush and Paulson emphasize that the rate freezed program is aimed at owner-occupants, rather than investors not occupying their homes as a primary residence. It would apply to borrowers who took out mortgage loans between January 1, 2005 and July 31, 2007, whose initial rates would reset at higher levels between January 1, 2008 and July 31, 2010.
DEAN MOSS & DEAN'S TEAM CHICAGO
