Bush Administration and Lending Industry Reach Agreement on Mortgage Rate Freeze Plan

Today, the Bush administration and the Lending Industry announced their plan for helping homeowners who are facing higher mortgage payments when their upcoming subprime ARM loans reset. Faced with the prospect of 2 million subprime mortgages scheduled to reset at higher interest rates in the coming years, the agreement will freeze the loans' current interest rate for the next five years. The administration stressed that the deal is not a bailout because no government money is involved and limits will be put in place as to exactly what type of borrowers will be eligible for the program.

By adopting such limits, only those borrowers who are current on their payments and can't afford the higher reset interest rates will qualify. Borrowers who have been  delinquent will not be eligible. Those borrowers will still need to work out some other form of relief with the individual lenders or face foreclosure.

In his speech announcing the new program, President Bush also urged the Congress to pass the proposed FHA Modernization Bill immediately and for HUD to continue their efforts with regards to the FHA Secure program.

The New Freeze Program includes the following guidelines:

• Eligible borrowers include those with subprime loans made between January 1, 2005, and July 30, 2007. The loans must be scheduled to reset between January 1, 2008, and July 31, 2010.
• The freeze will be in place for 5 years.
• Borrowers must be current on their loan payments.
• Borrowers will be eligible if they can show they are a reasonable credit risk, cannot afford the higher rates, and are actually living in the home as their primary residence.

The government's regulators estimate some 1.2 million borrowers should be eligible for this new program and the lending industry has already started sending out  notification letters. In addition, the process of making counselors available to the public is also underway. For more information you can call 1-888-995-HOPE.

As lenders we applaud this approach as it does not include the use of any "taxpayers' funds" and should help "qualified and responsible" homeowners stay in their homes. It will also help by keeping these homes out of the resale marketplace and allow the housing industry to continue to work off its already inflated inventory of available properties.

Metro Mortgage Company is a full service federally regulated FHA approved lender. For loan information, you can contact us at MetroMtg@comcast.net.

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