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Bush Unveils Plan to Help Mortgage Crisis

By MARTIN CRUTSINGER,

Posted: 2007-12-06 16:08:53

WASHINGTON (Dec. 6) - Hundreds of thousands of strapped homeowners could get some relief from a plan negotiated by the Bush administration to freeze interest rates on subprime mortgages that are scheduled to rise in the coming months.

"There is no perfect solution," President Bush said Thursday as he announced an agreement hammered out with the mortgage industry. "The homeowners deserve our help. The steps I've outlined today are a sensible response to a serious challenge."

Charles Dharapak, AP

President Bush, flanked by Treasury Secretary Henry Paulson, right, and Housing and Urban Development Secretary Alphonso Jackson, left, announces his plan to freeze interest rates Thursday at the White House.

Bush has been accused of moving too slowly to address a crisis that has spread to the broader financial market. But he also was careful not to sound as if he were imposing a government solution and violating his free-market principles. He billed his plan as a voluntary, private-sector arrangement that involves no government money.

"We should not bail out lenders, real estate speculators or those made the reckless decision to buy a home they knew they could never afford," Bush said after meeting with industry leaders at the White House. "But there are some responsible homeowners who could avoid foreclosure with some assistance."

Bush said 1.2 million people could be eligible for help. But only a fraction will be subject to the rate freeze. Others would get assistance in refinancing with their lenders and moving into loans secured by the Federal Housing Administration, Bush said.

Also, the aid will only come to those who ask for it, he said. Thousands of borrowers who are falling behind on their payments have been sent letters about the options, and Bush also urged people to call a new hot line: 1-888-995-HOPE.

The announcement followed the news earlier Thursday that home foreclosures surged to an all-time high in the July-September period. The Mortgage Bankers Association reported that the percentage of all mortgages that started the foreclosure process in the third quarter jumped to a record 0.78 percent, surpassing the previous record of 0.65 percent of all mortgages in the second quarter.

The administration's effort is aimed at stemming a further tidal wave of foreclosures in coming years as 2 million subprime mortgages loans provided to borrowers with spotty credit histories reset from their introductory rates of around 7 percent to 8 percent to levels as high as 11 percent, adding hundreds of dollars to the typical monthly payment.

A recent surge in mortgage defaults, part of the worst housing slump in more than two decades, has piled up billions of dollars in losses for big banks, hedge funds and other investors while roiling financial markets worldwide. Some economists think the housing bust may become severe enough to push the country into recession.

Bush originally gave the wrong number for the hot line; the White House later corrected him.

The president mentioned other steps to prevent foreclosures. The FHA has greater flexibility to offer refinancing to homeowners with good credit histories. It is expected that this eventually will help 300,000 families, officials said.

The Federal Reserve is announcing stronger lending standards this month, while the Housing and Urban Development Department and federal banking regulators are acting to improve disclosure requirements, he said.

Fed Chairman Ben Bernanke said the streamlined procedures for supporting efforts to refinance mortgages and freeze rates were a "welcome step in helping Americans protect their homes and communities from the consequences of unnecessary foreclosures."

The highest-profile part of the plan would freeze introductory "teaser" rates on certain subprime mortgages, preventing rates from rising for five years.

This offer would apply only to people living in their homes and who have not missed any payments at the lower rate. It also only would apply to loans taken out between 2005 and this past July 30 and scheduled to rise to higher rates in 2008 and 2009.

The hope is that the five-year freeze will buy time for the housing sales and prices to start rising again. Such a rebound would enable homeowners to refinance their current adjustable rate mortgages into fixed-rate loans with more affordable monthly payments.

But even Treasury Secretary Henry Paulson, who led the negotiations with the mortgage industry, acknowledged the effort is "not a silver bullet."

"We face a difficult problem," he said.

The big sticking point in the negotiations was getting investors who had purchased the mortgages after they were bundled into securities to agree to accept lower interest payments. Critics have said even with a deal, there are likely to be lawsuits. But officials representing major players in the mortgage industry said they believed the plan would withstand any legal challenges and would help at-risk homeowners avoid defaulting on their mortgages.

But George Miller, executive director of the American Securitization Forum, which represents companies that package mortgages into mortgage-backed securities, told reporters he expected the industry would face suits from investors unhappy that the original terms of the mortgages have been modified.

The president also did not miss the chance to lash out at the Democratic-controlled Congress.

Bush blamed lawmakers for not sending him legislation that he said would show they "are serious about responding to the challenges in the housing market." One measure would give the FHA more flexibility; a second would change the tax laws temporarily to help people who have a portion of their mortgage forgiven by banks.

"The Congress has not sent me a single bill to help homeowners," Bush said.

Copyright 2008 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. All active hyperlinks have been inserted by AOL.

2007-12-05 14:29:41

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3162 comments

mattw2411 12:42:03 AM Feb 20 2008

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You guys need to go to www.fflimited.com. I am using their product if you have any questions. It works very well. Just spreading the knowledge!

KapeKodda1 01:11:24 AM Jan 25 2008

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just completed the loan modification from this plan--saved mu azz no costs at all got 5.5% fixed rate fro remaineder of my mortgage,that was going to an ajustable rate from 7.74% to 10.774%
so the bush plan is awesome thank you president bush,i would have lost my home! thank you thank you!

MS ROGERS 40 03:42:22 PM Jan 12 2008

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These sub prime lenders prey on the uneducated and those who are poor and have low credit scores with a lot of hidden cost which is impossile to understand. Diann Rogers 320 Medallion Circle Shreveport LA 71119

Ascataloflorien 08:06:00 PM Dec 08 2007

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well all the griping about not getting help backin 1980s and 90s aside i don't think enough is going to be done by this plan, for several reasons 1. its voluntary, meaning the lenders don't have to do it if they don't want to. it should have been made mandetory 2. it helps too few people there willstill be many people who lose their homes that could have kept them if they would have gotten help 3. i feel these sub prime/adjustable rate loans should be made illegal as they are largely responsible for this mortage meltdown

Toosubdued 05:13:42 PM Dec 07 2007

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The average repo house (subprime repo) is valued around $187,000. This data comes from a prof mort lending site. These are not the McMansions youâre all hallucinating about.

The average subprime ARM started somewhere around 8 per cent, before it adjusts. How is that grossly unfair to investors to freeze the interest on that kind of loan, when it is performing.??!!(Iâm not referring here to exotic no-interest, or back-end loans)

My brother bought his first 3br/2ba house in 80s for 150K @17% = $ 2300 payment. Sold same house last year for 320K @ 6% = $ 2000 payment. Who's the bigger sucker? NOT the guy who bought a house in 2006. It was a lower payment than those outta control inflationary times of the 80s and early 90s, and the debt/earnings is even better now!!

You people need to read more, or go back to school.

Sine 696 02:05:46 PM Dec 07 2007

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Its like when youre a kid and you get a "do over"

JASCO27 08:49:17 PM Dec 06 2007

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No wonder why the rest of the world laughs at us. We deserve to have our dollar collapse on the world market against the Euro and other currencies. We have brought it upon ourselves.

LAboyGA 08:49:00 PM Dec 06 2007

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By the way all you Republicans candidates you can thank Bush when you get your butts kicked. Just based on this little comment section on AOL, you have already lost 3 or 4 votes and sounds like more to come....

You would think his stupid mind would click into place at some point but he just seems to get worse

LAboyGA 08:43:00 PM Dec 06 2007

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I am all for helping peope but the Bush Admin caused this problem in the first place. After the war he gave a green light for big lenders to give loans to anyone that applies with no restrictions, just have a heart beat, per Greenspan. Economy was heading for a crash

Now the same big lenders are telling him to do something about it and help out.

Its stupid for gov. to even get involved. Just like others have said did gov. help with 22% int. rip-off we had or did they help people who were reasonable and could not buy homes because of stupid inflated prices?

If Bush wants to help idiots that could not afford rent and that went bought $500K homes with 0 down here in CA, then the Admin need to start paying my rent because they caused me not to buy a home in the first place and I am being penelized for being sensible.....

RJayW2 08:41:32 PM Dec 06 2007

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Potsiegb 08:18:46 PM Dec 06 2007

Report This! I THOUGHT THIS WAS THE GREATEST ECONOMY IN HISTORY, ACCORDING TO BUSHY AND HIS SHEEPLE?? OOPS, DUPED AGAIN..
________________________________--
Thew Potsies of the world are easy to DUPE. Buy a house with no down payment and adjustable interest rates that you can't afford? Why then it's BUSH's fault, no doubt. You, after all, are mere DUPES...children who the government (and responsible, adult taxpayers) have to look after. Potsie....great descriptive name.

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3162 comments