Bush Announces Mortgage Rate Freeze Plan
Thursday, December 6, 2007; 7:59 PM
WASHINGTON -- The Bush administration offered hope to beleaguered homeowners Thursday with a five-year freeze in loan rates for those who qualify, even as the number of bad mortgages jumped to the highest level ever.
The plan represented the administration's biggest action yet to show it is dealing aggressively with the mortgage crisis. The escalating problem is becoming a political issue and threatening to push the country into a recession.
"The holidays are fast approaching and this will be a time of anxiety for Americans worried about their mortgages and their homes," Bush said. The administration's efforts, he said, are "a sensible response to a serious challenge."
The initiative would hold down rates for certain subprime mortgages, which are loans offered to borrowers with spotty credit histories. These loans offer initial "teaser" rates for the first two to three years before rates climb sharply, potentially increasing monthly payments by as much as 30 percent.
Bush released his plan on a day the Mortgage Bankers Association reported that the number of mortgages entering the foreclosure process in the July-September period set a record. Behind those foreclosures is a steep slump in the housing market. After a five-year boom, home sales are plunging and prices declining in many parts of the country. More foreclosures mean more homes dumped on a glutted market.
The housing slump has caused multibillion-dollar losses at some of the largest banks and investment firms and roiled financial markets. All these problems are expected to drag down economic growth to near recession levels over the final three months of this year and into early 2008.
The administration hopes the rate freeze will slow the pace of foreclosures, buying time for the housing market to stabilize and begin to recover. A rebound in sales and home prices will allow struggling homeowners to switch their current adjustable-rate mortgages to more affordable fixed-rate loans.
Disabled veteran Jerry Alberson, 48, said he hopes he will qualify. He has a $180,000 mortgage on a two-story lakefront house in northern Mississippi that he has spent years gutting and remodeling.
"That freeze will definitely help," he said. "I'm not asking them to give me anything, just some time out."
At his White House announcement, Bush insisted the country's underlying economic fundamentals were sound. But critics said his administration was slow in reacting to the housing crisis and the delay had worsened the slump. Some contended Bush's plan was too narrowly focused.
Democratic presidential candidate John Edwards cited his proposal for a freeze on any more foreclosures. That is intended to pressure lenders to renegotiate.
"Our nation is facing a housing crisis that could cost millions of families their homes, devastate neighborhoods and seriously damage our economy," Edwards said in a statement. "The Bush plan is months late and more than a million families short."