White House, Banks Hammer Out Foreclosure Plan
The Bush administration and major financial institutions are close to an agreement that would temporarily freeze mortgage rates for home owners with spotty credit histories.The agreement is designed help the 500,000 subprime borrowers whose mortgages are resetting and are likely to result in foreclosures, threatening the broader economy.
A sticking point is which homeowners would qualify and how much they would have to pay to refinance or freeze their loans, sources close to the discussion say.
Treasury officials say financial institutions are likely to create a set of criteria based on income, credit-worthiness and the amount of equity borrowers have in their home.
They will then divide borrowers into three groups: those who can continue to make their payments even if rates rise; those who can’t afford their mortgages even if rates stay steady; and those who could keep their homes if the maturity date of their mortgages were extended or the interest rates remained at the teaser rates.
Only the third group would be eligible for help.
Source: The Washington Post, Deborah Solomon, James R. Hagerty and Lingling Wei (12/01/2007)