Rate Freeze Could Help 1.2M Borrowers

Many people may have seen the news, or read in the paper that mortgage interest rates will be frozen for ARM borrowers who are not yet in foreclosure. No Hard Sale Realty, LLC wants to bring you a short version of it.

According to CNNMoney staff writer, Les Christie on December 6, 2007, the Bush administration unveiled a foreclosure relief plan that could help 1.2 million distressed homeowners. President Bush and Treasury Secretary Henry Paulson said the plan will simplify the mortgage modification process for many distressed borrowers. It will include a five-year freeze on interest rates for ARM borrowers who are current on their monthly payments.
Some of obstacles with this plan are contractual obligations between servicers, investors, as well as logistical difficulties. When loans have been chopped up and resold through the resale process, it can be hard to determine who ultimately has the authority to modify.

THIS PLAN EXCLUDES BORROWERS WHO:

1. Are more than 30 days late at the time the mortgage would be modified
2. Have been more than 60 days late at any time within the previous 12 months
3. Loans were not originated between Jan. 1, 2005 and July 31, 2007
4. Rates are scheduled to reset earlier than Jan. 1, 2008 and later than July 31, 2010, and the restructuring process begins after the loans reset
5. Reset increase payments that are <10%
6. Are judged capable of continuing to make mortgage payments at the higher reset rates
7. Can't afford the loan even at low introductory rates

An analyst report from an investment bank Barclays Capital which cited in The New York Times, currently, there are approximately 2 million subprime ARMS that are expected to reset through the end of 2009. Of those, about 240,000 would be covered by the freeze. Other borrowers will gain relief through FHASecure and other, lender-initiated refinancing efforts. Where as, The Center for Responsible Lending, a group that promotes homeownership and works to curb predatory lending, estimates that only 145,000 households will qualify for the rate freeze.

Despite all the criticisms, this rate freeze initiative was welcomed by nearly all the players, including consumer groups. Many wish it were stronger, but were happy to see some response from the Bush administration.

Do you want to know if you or those you know may qualify for the mortgage bailout? Please e-mail Stephen_gandel@moneymail.com.

Source: By CNNMoney Staff Writer, Les Christie 12/6/2007.