Deal in the Works To Freeze Rates on Subprime Loans

From the Washington Post:

Deal in the Works To Freeze Rates on Subprime Loans

By David Cho
Washington Post Staff Writer
Saturday, December 1, 2007; Page A01

Mortgage rates for homeowners with spotty credit histories would be temporarily frozen under a nearly completed agreement between top Bush administration officials and a broad alliance of Wall Street's biggest banks, mortgage investors, nonprofits and consumer groups.

The plan, which could be announced next week, is designed to prevent soaring mortgage delinquencies from escalating into a full-blown foreclosure crisis that would threaten the broader economy, according to several people involved in or familiar with the discussions.

The agreement focuses on aiding many of the 2 million credit-challenged, or subprime, borrowers who, at the peak of the real estate boom in 2005 and 2006, bought houses with mortgages that offered low teaser rates that rise after the first two or three years of the loan. By the end of next year, about 500,000 people are expected to lose their homes because they cannot meet the new, higher monthly payments, federal housing officials said.

Homeowners could apply to freeze their rates or refinance their loans quickly under the deal being worked out by Treasury officials; the Hope Now Alliance, a broad coalition of consumer counseling groups, investors, nonprofits such as Homeownership Preservation Foundation; and lenders such as Citigroup, Wells Fargo, and Countrywide Financial.

Important details still need to be worked out, but the proposal gained traction yesterday in Washington and on Wall Street, where the stocks of nearly every mortgage-related firm rose sharply after reports about the deal surfaced. Shares of Countrywide, the nation's largest mortgage lender, soared 16 percent, as investors hoped the plan would smooth out the credit crunch and return normality to the lending business.

A potential sticking point is determining which homeowners would qualify for the help and how much they would have to pay to refinance or freeze their loans, several sources close to the discussion said.


Barry Glassman, a senior vice president at Cassaday and Co., a financial planner in McLean, said any plan that bails out only a segment of homeowners would raise questions of fairness.

"The big challenge will be figuring out who this affects and who gets this help," he said. "Where do we cut it off? Who's the person next in line that doesn't get the bail out? That's the most difficult question."

Those involved in the deal said alliance members were aware that some homeowners, no matter how much aid they receive, might never be able to afford their homes. They also do not want to help real estate speculators. The aim would be to reach homeowners who, with lower interest rates, could keep up their monthly payments.

Rest of article is HERE.

If this does indeed turn out to be true, it will honestly be the FIRST THING, in seven years of this President's reign that could remotely be construed as helping ' the little guy'. And, it took an impending irrevocable financial crisis of epic proportions to get him to find some humanity.