Bush mortgage plan includes rate freeze

[maddezmom]

Source: AP

Bush mortgage plan includes rate freeze By MARTIN CRUTSINGER and ALAN ZIBEL, Associated Press Writers
15 minutes ago



WASHINGTON - Congressional aides say the Bush administration has hammered out an agreement with industry to freeze interest rates for certain subprime mortgages for five years in an effort to combat a soaring tide of foreclosures.

These 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 as much as seven years and industry arguments that the freeze should only last one to 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.

The administration said that President Bush will speak on the agreement at the White House on Thursday and the Treasury Department announced that Treasury Secretrary Henry Paulson and Housing and Urban Development Secretary Alphonso Jackson would hold a joint news conference Thursday afternoon with officials of the mortgage industry.



Read more: http://news.yahoo.com/s/ap/20071205/ap_on_go_pr_wh/mortgage_crisis

[Newsjock]

1. Where's my five-year rent freeze?

I was responsible and did not buy more house than I could afford, all the while being subjected to massive rent increases. Where's my reward?

[dbackjon]

4. No shit

I did not want to do a sub-prime loan, so here I rent. Meanwhile, irresponsible lenders and borrowers are being rewarded for their greed/stupidity.

[sandnsea]

6. Right in there in that rate freeze

Do you really want houses sitting empty and tied up in foreclosure - while the tenants are competing with you for rentals?? There's your reward.

[Virginia Dare]

11. It's going to happen that way anyway...

this won't prevent any of that from happening. It's like putting a bandaid on an amputation.

[sandnsea]

12. Yes it will

It'll give it time to settle down, allow some confidence to rebuild. Lots of people will be able to stay in their homes if the interest rate is set, allow them time to advance in their careers, build credit, refinance. It's the kind of thing FDR would have done, so I don't know why people are bitching about it.

[Virginia Dare]

14. What I'm bitching about is that everybody sat by and let this happen..

and now we're all going to pay the price. It didn't have to be this way.

The industry was allowed to run roughshod over the consumers, and now the consumers will pay a disproportionate price for all of this before it all shakes out.

I hope you're right that this will be enough to stop the bleed, but somehow I don't think so.

[sandnsea]

26. If it weren't for the harm to the banks

the Bushies wouldn't do shit about it. They don't care about the people in their homes, that's for sure. I am just scared to death doing nothing will lead to a full out economic collapse and I know the bottom always suffers first in those situations. I don't care if the top get help if it keeps the bottom from living in tents by the river.

[Virginia Dare]

58. I just feel like at this point, it's the equivalent of nothing...

much like Iraq, I just don't see any good solutions to this.

[JuniperLea]

19. Right you are

If these people are smart, they will unload their properties, and their mortgages they can't ultimately afford, in the five-year term. There should be plenty of lower priced (read affordable to them) housing on the market with all the prices falling.

[klyon]

71. The problem there is that to sell, if they can, they will have to pay

the difference in what they owe and what they sell for. If they are broke they won't be able to come up with the difference so then foreclosure is all there is. I say give them good paper.

[JuniperLea]

18. That assumes those that own rental properties are on the up and up...

Instead of greedy and ready to make a killing in the flooded rental market. Supply and demand will jack up all rents that are not under rent controls.

[sandnsea]

24. If the rental market isn't flooded

because people can stay in their homes, then there won't be any supply and demand problem to jack up all rents.

[JuniperLea]

27. This is a five-year band-aid

Those people cannot afford the homes they bought. That is the bottom line. There is no magic pill or wand that will make them able to afford those homes. It was a major screw-up to allow them to get the loans in the first place. This situation will not be un-screwed with a five-year delay in responsibility. Eventually, all the subprime homeowners are either going to have to sell and move to a property they CAN afford, or sell and rent.

[sandnsea]

29. They obviously ARE

or they wouldn't be in them today. You're making assumptions based on a bunch of phony propaganda to push the blame from the mortgage industry to the buyers. The mortgage industry caused this problem by pushing these phony loans. They should suffer the consequences, not the people who were just trying to get a place to live before they ended up in somebody's garage for $1,000 a month.

[JuniperLea]

43. They obviously are ? what?

Able to afford those homes? Not a chance! If they were able to afford those homes, then they would have been able to afford the new mortgage payment. The initial mortgage payments were at a "teaser" rate.

I'm not making assumptions whatsoever. I've worked in real estate, investments, and loans. I know full well what I'm talking about. I don't get sucked into crap like this.

You are right. These are 'phony' loans... in the beginning. No one put a gun to the borrower's heads and forced them to get in over their heads. They were lured in, without question. And those practices are horribly unethical. But the fact remains, these people cannot afford the homes or the mortgages they are in and that situation will need to be rectified. Allowing people to stay in homes far beyond their means is not the answer. I think their down payments (if any), and closing costs should be returned, and they should be let off the hook completely, with the property reverting back to the bank/investment vehicle, to be resold. That is the fair thing to do. The only people who will be out of pocket are the lenders.

[sandnsea]

52. Why not just set their interest rate

Why should they be forced out of a home if they could stay in it with the interest rate they have. If you are in real estate, then you well know that these supposed cheap teaser rates aren't lower than what many older people with 20 year jobs and mortgages could get. Nobody will be hurt if these interest rates are frozen. If they can afford their mortgage payment now, then give them a fair shot at refinancing. A 5 year freeze will do that.

[JuniperLea]

53. The buyers/current homeowner would be hurt!!!

They would never fully own their homes! You couldn't amortize these loans over 75 or 100 years at the lower rates! Refinancing won't help because there is still too much home/mortgage, zero equity, and not enough years to live for a payoff. A mortgage is exactly that... a gage on your mortality. People making lower to middle class wages a year simply don't have enough years in them to pay off a loan the size we're talking about here! They will be retiring and won't be able to keep up with the mortgage at a time when they should have paid off their houses. Even if their income goes up 5% every year. And we know that won't happen in this economy, nor in the economy to come, because it's only going to get worse.

This people had a cruel hoax played on them. An even more cruel hoax would be to give them false hope, which is what this five-year fixed is doing.

[sandnsea]

54. That doesn't even make any sense

Unless you took an interest only loan, your argument is so plainly wrong that it's jaw dropping. The interest has nothing to do with the principle. The principle will be what it is, it was calculated into the original ARM loan, which were generally 30 year just like a fixed rate. You make their ARM rate permanent, and they basically have a 30 year fixed. There's no harm in that.

[JuniperLea]

74. You need to do the math

[JuniperLea]

77. People are not going to be able to stay in their homes

That's a pipe dream. It was a pipe dream to own them in the first place. Americans have been manipulated once again. These creeps knew full well what this scheme would amount to, and where it would end, before they even started.

[Virginia Dare]

7. Where's my mortgage rebate?

stupid me signed a fixed rate that I could afford.

[slackmaster]

28. I passed up many opportunities to trade my fixed rate in for a low "teaser" rate

I feel cheated too.

[closeupready]

45. Schmuck.

:sarcasm: But you know seriously, I had a friend who used to tell me, "always live beyond your means." I guess he was alluding to this kind of thing, i.e., you get to have a party and in the end, there's always a way out. Frankly, it disgusts me.

[Virginia Dare]

61. The Bush administration has been cheerleading the American consumer..

for 7 years to live beyond our means (as has the lending industry natch). Woopee, the carnival ride's never going to end!!!

[MaineDem]

64. You've hit it on the head! Remember the whole "Ownership Society"!

I thought it odd when Bush and the Republicans were pushing for everyone to own a home. On the surface, that's not a bad thing. But the banks and lenders were making a fortune on this. I'm sure we all saw For Sale signs with "No Money Down" attached to them.

Who profited? The Republicans and their cronies.

And, I'm sorry, but don't people who take out mortgage loans read the small print?

[Virginia Dare]

65. Many don't...

after all these were supposedly reputable agencies selling these mortgages. I'm sure it didn't occur to most people that they were being swindled. I know people who were taken in by these, and later thought the better of it and got out of them. Those were the lucky ones. These aren't "stupid" people either.

[JuniperLea]

75. That is what many people here are forgetting

This scheme was cooked up by BushCo and his cronies. Who benefits? Those who had quick cash, and those who will swoop down and pick up the real estate that is sitting unsaleable.

There is a lot more to this domino tumble that is meeting the eyes right now, mark my words.

[thecrow]

47. I was too...

and here I am watching as these mortgagers get a five year break on their lending practices?
Well, at least I HAVE a home.
This is despicable, and do you really think it will save the banks in the end?
It's just to get out of hot water until the next person takes office.

[Maine-ah]

63. where's mine?

I bought 7 years ago, with a 30 year, refied with another 30 year for a lower payment a couple of years ago. The only reason we're struggling now is because the cost of living has gone way up, and wages are stagnant. My payment is only 670 month. A couple of years ago, this was very affordable, now, with heating costs, gas, food ect...... we're a bit fugged.

It's not just the people who bought beyond their means. It's responsible people too.

[Hugin]

2. Stupidest plan... EVER!

:eyes:

[Virginia Dare]

9. Well, at least they're consistent....

in their stupidity that is.

[seriousstan]

10. What would your plan be?

[Hugin]

13. In my plan somebody goes to jail...

A few banks collapse...

The Markets take a well deserved wallop.

Bush leaves office in economic disgrace instead of passing the buck to his successor and ducking out
to Paraguay.

The borrowers get regular old 30 year fixed rate Mortgages (If they can afford it)

The BANKS do not get PAID to transfer these mortgages.

I call it the... 'Let the Chips fall as they May' plan.

Instead of the accepted plan which obviously the only purpose of is a delaying tactic to keep the banks from
having to take responsibility for this outrageous fiasco.

[sandnsea]

30. Borrowers get 30 year fixed rates

That's what freezing the rates now does, gives the borrowers a chance to get those mortgages. I can't believe how many DUers harbor such hatred for their fellow human beings. People who claim to be caring liberals need to take a second look.

[Hugin]

32. I have nothing against the borrowers... It's the criminals who schemed up these rate plans

and promoted them who need to answer.

Liberal most assuredly doesn't mean one condones criminal activity. That's why there are laws which need to
be followed to prevent incidents such as this. But, the whole financial industry and corporations in general
have been lawless for some time now (or at least acting as such). Especially, during the current administration.

[slackmaster]

33. Not all of the borrowers are blameless, Prag

I say look at each case individually.

Someone who was criminally duped deserves help.

Someone who criminally duped people deserves to go to jail, pay fines, etc.

Someone who knowingly bought too much house deserves to be foreclosed on.

Someone who invested in packages of risky loans deserves to take a bath.

[Hugin]

36. Now! There's a plan I can buy into...

:thumbsup:

But, who's to do the work and how is it they would be paid?

Surely, we can't leave it up to the 'self-regulating' corporations... They'd turn it into a churn-o-rama.

[sandnsea]

39. It's not that simple

Some things were legal that shouldn't have been. Other things are "accepted practice" and difficult to prove as actual crime. And others were desperate to get into a home before they ended up with no home to go to. I still don't know if I'm going to be able to stay in my town long term because of the rising housing market. I don't blame young people who bought a home before the prices doubled again.

[Hugin]

42. Unfortunately, the ultimate result of this delay band-aid plan combined with the low dollar will be

People will scurry away from their ARM ASAP and overseas (read: foreign) investors will swarm in and scarf up
assets at rock bottom prices. (It's already happening and it happened during the high yen a decade or so ago.)

Ultimately, all of these ARM victims will end up renting from these investors and the banks will slink away
breathing a sigh of relief counting their money.

The little guy still gets it in the end.

[sandnsea]

44. No, they'll get a fixed rate

As their income adjusts and the market settles. If we don't do anything, then your scenario is what is going to happen, immediately.

[JuniperLea]

76. Thank you... this is the big picture that so many here are refusing to see

Follow the money. Who pushed this, and who benefited, and who will benefit down the road?

The US will NOT be an ownership society, our land and homes will be owned by foreign investors just like everything else.

These creeps knew full well what they were doing, and how it would end. It was planned from the beginning and America fell for it hook line and sinker... flocking to the sale like moths to the flame.

[dysfunctional press]

67. "Someone who invested in packages of risky loans deserves to take a bath"

a lot of the loan packages had AAA ratings- the people who set up the packages should be held to account- not some fishing village in norway, or a teacher's union pension fund in florida.

[sandnsea]

38. I agree

But if that isn't going to happen, then at least help the people who were stuck in this mess.

[dbackjon]

3. Isn't that anti-capitalistic?

And doesn't that in turn screw over people who want to get new loans?

[CountAllVotes]

8. new loan?

what is that anyway, are they still going to be giving them out so easily now? Probably it will be at least 6.5% right now (which actually is a pretty good deal considering where it was when I tried to buy a home in 1999 (it was 8% at that time)).

This does reward those that got that ARM and cannot pay or even is they can pay, the rate is frozen for five years! For the new buyer, it is back to the way it was before I am only guessing. Who knows the reality of any of this?

:argh:

[Betty]

5. the government cleaning up after the private sector????

what happened to free market, deregulated CAPITALISM??????

[gasperc]

15. mmm nice, and what do the loans reset to after the freeze?

and won't this trigger a new flood of sales as people try to get out of the property before the loan resets?

All of the foreclosed homes are not sub-prime loans. Many people have allowed the property to go into foreclosure because their home became a depreciating asset and they were unable to sell at a price to meet their costs so they simply walked away. This plan also ignores the other big problem with many of these loans is the pre-payment penalties. In their infinite wisdom, the lenders not only decided to fuck the borrower with junk loans that negatively amortorized, reset at rates tremendously higher than a standard fixed rate loan but they also made it punative to get out of the fucked deal by demanding a pre-payment penalty.

[CountAllVotes]

21. just wait ...

it puts off the total melt down until the year 2012. We'll have the NEXT president to blame then! :mad:

:kick:

[Lance_Boyle]

16. If the suckered get a freeze, I want a rate decrease.

I could've gotten a lot more house if I'd taken a riskier mortgage. Guess the suckered are now the lucky winners - who knew you get more house than you can afford as a parting gift when you gamble and lose?

[JuniperLea]

20. You got that right...

But wait, you are going to be compared to a Republican in 5... 4... 3... 2...

[slackmaster]

17. I wonder where Congress or the Executive branch could find authority to do that

Can they arbitrarily decide to change the terms of private contracts?

How will holders of legitimate notes be compensated for the loss of expected income increases?

[JuniperLea]

22. Good call!

Those loans were sold, and a higher return promised. Who will keep those promises? Does the president also control the stock market? The bond market? Mutual fund trading?

[truebrit71]

23. I'm sorry but this is bullshit....

..if the borrower was a victim of fraudulent practices then fair enough, but if you "over-bought" too fucking bad I'm afraid...

Read the small print time next time...

[Virginia Dare]

25. Just about everybody here in the D.C. area "overbought"..

because speculation caused the market to climb to levels of extreme insanity to the point where $400,000 was "affordable".

[CountAllVotes]

34. that is like it is all over the country in too many places!

It is like that here too right now. The house you bought a few years ago for ~$80,000. is now selling for $300,000. I haven't seen that many foreclosures around here yet but I do see a lot of "Foreclosure Problems, Call xxx-xxxx" signs. :shrug:

[Lance_Boyle]

35. no, see - that's the problem

Market prices don't render houses affordable or not, they only determine to whom houses are affordable. One's income makes a house affordable or not. If a person couldn't afford a fixed rate mortgage for that $400,000 house three years ago, and hasn't been able to afford refinancing his risky ARM into one since then, THE HOUSE WAS NEVER AFFORDABLE FOR THAT PERSON IN THE FIRST PLACE. It is as much (if not more) that person's responsibility to know this as it is the lender's.

[slackmaster]

37. I make about twice as much as I did when I bought my house in 1994

But the house has about quadrupled in value, so I couldn't afford to buy it today. Saving up a decent downpayment (about $60 - 120K) would be difficult, and the monthly payments (including the higher property tax) would be about 75% of my take-home pay.

[Lance_Boyle]

48. you are not in the market to buy the house today

You could afford it when you bought, I presume, and are locked into a fixed-rate mortgage reflecting the value of the home when you bought it. If you were in the market today and didn't currently own the house, that house would not be affordable to you. Probably not 3 years ago, either. But 3 years ago you could've gotten a gimmick mortgage that would let you into it anyway. Or you could've gotten a reasonable fixed-rate mortgage on a house you could afford in the 3-year-ago market. The second option would have you in a circumstance similar to the one you're in now, albeit in a smaller house, and with less equity. The first option would have you facing foreclosure. Real soon. And rightfully so.

[slackmaster]

49. So I could have refinanced with a "gimmick" loan 2-3 years ago to lower my payments

Then maybe taken advantage of whatever bailout scheme the .gov concocts.

[sandnsea]

55. Or

you could've gotten the second option, but only with a ARM because you couldn't get anybody to write a fixed rate because they were making more money with the gimmick loans. So you took the ARM because you were going to lose the very affordable house if you didn't. And have no home at all. You wouldn't be facing any financial problems if the mortgage companies had just written fixed rate loans all along.

[pokercat999]

72. In Sterling VA area I remember seeing entry level

town homes advertised at $400K.....entry level.

[sarcasmo]

31. What's he gonna do in March when the whole bottom falls out of this mess?

Billions of ARM loans will adjust upward in March and it will wind up being the peak of this nightmare.

[Outlier]

41. So much for those free market principles.

Bush is pissing into the wind onto the tip of a very large iceberg. Next spring is when tshtf. Where were the bank regulators when no doc and low doc loans were being made. 40 year mortgages with the first ten years just interest. The Fed and the FDIC are culpable in this mess as well.

What have the banks been promised in return for their agreeing to renegotiate their loans, some more fed rate cuts. They are getting something out of this. I have a feeling the tax payer will be getting fleeced, for someone else's fuckup.

[Virginia Dare]

60. The "conservatives" are twisting themselves into pretzels..

trying to wrap themselves around all of this. Welcome to DU!!

[Virginia Dare]

57. The same thing the Federal Reserve is doing, PUNT!...n/t

[Zambero]

40. 'Freeze' at today's Foreclosure-Plus rates? Gee Thanks!

That means we'll continue to see record foreclosure rates. I didn't detect the term "rollback" anywhere!

[sandnsea]

46. I think at their own ARM loan rates

What each person has and is currently paying. I think that's what they're proposing. Not adjusting everybody to today's rate.

[ozone_man]

50. How about my Nasdaq stocks that went down?

Why do real estate investors get a break? This is bizarre. If anything, let the mortgage companies pay for it. Not another government bail out for irresponsible lenders.

[Virginia Dare]

62. No shit,

all of those bundled bad loans that Wall Street was passing off as good loans is going to eventually trash our economy. We haven't even felt the tip of the ice berg yet. I was reading a column yesterday by an economist that I very much respect and is usually on the money who said this could well lead to another 1929. He said at the very least it will be worse than any of the recessions we've had going back to the 70's.

[FreeStateDemocrat]

51. Smell test: What are the money boys getting out of this deal or are

they doing this out of the goodness of their coal-black hearts? Follow-up question is how much is this going to cost working class taxpayers?

[sandnsea]

56. They're avoiding bankruptcy

I haven't heard that this is going to cost taxpayers anything - yet. This is a classic case of cutting off ones nose to spite ones face - because if this crashes down, everybody is going to get hurt. It sucks that some of the money boys might get bailed out of their own crisis, but if that's what it takes to keep from a very real depression, that's what it takes.

[Virginia Dare]

59. Not yet...

but by the time this all shakes out, it will cost us all plenty, the industry isn't going to take the fall--BANK ON THAT! No pun intended.

[Massachusetts]

73. "Its the kind of thing FDR would have done"

Yes, you are correct.

Remember DU'ers, DON'T LET THEM (anyone who tries), TO KILL THE NEW DEAL.

[FreeStateDemocrat]

79. "As the cost of the bailout goes up, there's little doubt that state and federal governments will

float new bonds to pay the refinancing fees and, of course, interest payments on those obligations will be paid by all citizens."

http://articles.moneycentral.msn.com/Investing/SuperModels/HomeownerBailoutIsALousyIdea.aspx?page=2

This is starting to stink for the working class, responsible taxpayer.

[spinbaby]

66. Most don't qualify

And I suspect that even those who qualify for a rate freeze are going to think twice about staying in a house that's now worth a great deal less than what they owe on it.

[inMD]

68. Banks!!!!

Is anyone surprised that the idiot banks (that came up with these BS loans that would put people on the edge and then push them off and then convinced many un-savvy home buyers to take these loans and buy over their heads) could not just come up with this simple plan without government intervention? I mean, it is in their best interest to do this, they avoid foreclosures and still make money. How much do those Bank President's earn to scheme loans but not solve real corporate problems like this one?

Bush's fault lies with letting some of these loans be allowed in the first place....interest-only no-money-down my ass. As soon as they created them, someone in govt should have stepped in and shut it down. And they are still legal now!!!

My ARM is to change rates next year, but I took it out in 2003 so I am not eligible for the rate freeze. I'm a little peeved that some get this advantage and others (me and all those with fixed higher rates) don't and it's hard to reason that away. And if those that benefit don't do anything smart in the next 5 years, then we are just pushing our problems into the future.

[klyon]

69. These companies that issued these "predatory loans" should be

told to give these people good paper at a fair rate that they can repay. Nixon tried the freeze approach it didn't work then it won't work now. It would just put off the inevitable. Variable rate mortgages are a crime and never should have happened.

[gasperc]

70. Damn, should've went with that 3% ARM

I'd be saving loads of dough next year

[leaninglib]

78. And once again, the responsible pay for the mistakes of the irresponsible.