Bush Administration Puts the Freeze on Subprime ARMs
After weeks of meetings between Treasury Department officials, mortgage lenders, and Wall Street firms, the Bush administration today announced that an agreement has been made to "freeze" interest rates for up to five years on certain subprime adjustable rate mortgages.
According to the New York Times, the goal of the President's plan is to convert as many subprime ARMs as possible into "more sustainable loans." However, the freeze applies only to borrowers who:
* Took out their loan between January 2005 and July 2007 and whose rates are set to increase between January of 2008 and July of 2010; and
* Have less than 3% equity in their homes; and
* Are current on their payments (or no more than 60 days behind); and
* Are able to handle their current lower rate, but will not be to handle a higher payment.
The freeze is a voluntary agreement on the part of lenders, so no legislation is required for this plan. Analysts note, however, that congressional approval would be necessary in order to increase current FHA loan limits.
Thanks to David Fairman of Franklin American Mortgage for this information.