Bush Mortgage Plan Will Freeze Certain Subprime Interest Rates For 5 Years

Source: CBS News
Date: Dec. 5, 2007

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, congressional aides said Wednesday.

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.

CBS News correspondent Anthony Mason reports that this plan is designed to help a very specific group of borrowers with adjustable rate mortgages, or ARMs. The plan is targeting people who are current - that is up-to-date - with payments on their loan, but would fall behind and risk foreclosure when the loan resets in the coming year.

Of the six and a half million subprime borrowers out there, Mason reports, estimates are about 12 percent, or 750,000, could be helped by this.