Housing: After the Bust Comes the Freeze

Well, it looks like they're going to do it.

According to this report from the Associated Press, the Bush Administration will announce today that an agreement has been reached to freeze the interest rates on certain adjustable subprime mortgages for five years in what will probably amount to the first of many fingers being stuck in the "housing dike", formerly known as the "housing boom".

You don't seem to hear the White House marveling at the homeownership rate much anymore - it's about time they got back around to talking about the nation's housing market.

Will this plan help to reduce the number of those pesky "FORECLOSURE" signs now dotting neighborhoods all around the country?

Probably not.

But, it makes it look like the government is doing something about the problem.

In my brief (and, thankfully, unsuccessful) foray into management many years ago, one of the things that I learned was that you never want to be accused of doing nothing, no matter how intractable a problem.

It matters little how hopeless the task may really be on closer inspection - people like it when it looks like you're trying to solve their problem even when you know you can't.

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.

The administration said that President Bush will speak on the agreement at the White House on Thursday and the Treasury Department announced that Treasury Secretary Henry Paulson and Housing and Urban Development Secretary Alphonso Jackson would hold a joint news conference Thursday afternoon with officials of the mortgage industry.

If this is a sign of things to come, I can't wait to see what they do next year - when the election season gets into full swing.

And if you're one of those lucky homeowners who, just a couple of years ago, took a chance on one of those risky adjustable rate loans with a teaser rate to get into a house that you really couldn't afford - while your neighbor opted for a fixed-rate loan and settled for a house they could afford - well then, CONGRATULATIONS!

It looks like you're going to get bailed out.

Comments

[vboring]

nobody will be saved by this. if i owe more than i can afford today because i lied about my income and am scraping by on a teaser rate, my situation won't be any better in five years unless my 1) house appreciates significantly, 2) my income increases significantly, or 3) i find a bigger fool to sell it to.

1) the lending practices of today indicate that prices will continue to decline
2) incomes are unlikely to leap up while the economy is in recession
3) because lending standards have changed, you have to be both a bigger fool and have real cash-money to put into the deal to bail a current owner out. i imagine those are in short supply today

something i haven't heard mentioned is whether the loan balance will continue to increase as per the original teaser rate loan conditions or will the lenders subsidize the rates and write it off?

[Lee Carlson]

Too little and wayyy to late !!! The "sub-prime" mortgages have already made many people part of the "unemployed" group. Or possible underemployed ! The teaser rates have already done their job !
This whole housing bubble is not so much a job done by Realtors,..it was caused primarily by lenders, who simply took an
opportunity to write undocumented loans and also simply ENCOURAGED people to "Fib" about their income, and the lenders went along with it because they sold those "packages" of sub-prime loans to other financial institutions or pension funds ...Yes, the lenders made a lot of money during the 2001- 2006 years, but now the rest of the economy is stuck with the disaster. Those "investors " who agreed to those loans are just as much to blame. Many,..just kids who wanted their own pad ! Everyone wants to blame someone for the crisis but it was not the realtors, it was the lenders who pushed R.E. Agencies and people to buy, buy, buy !,...Those great lenders would get anyone a loan,...and what ever happened to those Licensed appraisers who suddenly went stupid ? They were part of this fiasco too as they had to approve the values of loan amounts and were afraid to tell the lenders, that the property was not worth the prices being asked,..for fear that the lenders would find another appraiser who would agree to super high prices. It was primarily lenders who created this problem and I think they should participate in sharing the losses ! LC

[misslupin]

He is dead wrong with his congratulations. Look at the other article found on patrick; the requirements for the rate freeze - the loan HAD TO HAVE BEEN MADE BETWEEN JANUARY 2007 AND JULY 2007.

This whole thing is laughable and it won't really help anybody.