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Bush Wins Agreement To Freeze Mortgages
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The administration's plan appears to be winning support on both sides of the aisle. And perhaps as importantly, it has backing from key private-sector players, including nonprofit groups, mortgage lenders such as Countrywide Financial and big banks such as Citigroup. The five-year freeze represents a compromise among banking regulators, who wanted it to last seven years, and mortgage firms and banks, which argued it should be one or two years.
An analyst at the Competitive Enterprise Institute, a conservative think tank, said Bush's plan is bad policy.
"In some ways it's worse than a taxpayer bailout," said John Berlau, director of the Center for Entrepreneurship at the institute. "It pressures an industry to essentially alter the terms of millions of contracts, and it's going to make investors think twice about investing in America again."
Others, including Sen. Hillary Rodham Clinton (D-N.Y.), criticized the plan for not going far enough. Yesterday, the Democratic presidential candidate called for a moratorium of at least 90 days on subprime mortgage borrowers facing foreclosure and a five-year rate freeze on all subprime loans.
"Although the administration is finally giving the foreclosure crisis the attention it deserves, it seems that President Bush is going to give struggling homeowners far less than they need," Clinton said in a statement.
On Tuesday, Treasury Secretary Henry M. Paulson Jr. endorsed another plan at a briefing with members of the Senate Finance Committee that would temporarily let government-chartered Fannie Mae and Freddie Mac insure mortgages above their current limit. This would allow home buyers to get loans higher than $417,000 without paying higher "jumbo" rates, according to people at the briefing.
Paulson wants to tie this action to a broader overhaul of Fannie and Freddie, said Jennifer Zuccarelli, a Treasury spokeswoman.
