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Letter to the editor

Few helped by freeze on loan rates

The president's plan does nothing for most.

By Times Wires
Published December 7, 2007

WASHINGTON - President Bush acknowledges it's "no perfect solution." Treasury Secretary Henry Paulson says it's "no silver bullet."

The plan negotiated by the Bush administration to freeze the low introductory rates on subprime home loans appears likely to help only a fraction of the homeowners who face huge jumps in their mortgage payments.

Homeowners dialing up their mortgage companies to get their current rates frozen could be disappointed. The White House plan doesn't force mortgage companies to give eligible homeowners a break. It is voluntary.

Bush, announcing the initiative Thursday, said 1.2-million homeowners could be eligible for relief, which includes the rate freeze and efforts to help people refinance into more affordable mortgages. In the Tampa Bay area, about 50,000 homeowners could be eligible, assuming two-thirds of those holding subprime, adjustable-rate mortgages would struggle with new adjusted rates. The Center for Responsible Lending, a group that promotes home ownership and works to curb predatory lending, estimates that only 145,000 households nationally will qualify for the rate freeze. The criteria is too strict, it says.

Ritch Workman, president of the Florida Association of Mortgage Brokers, is relieved the plan is targeted. Banks and lenders feel the pinch, too, he said.

"The president's done a good job of limiting this to make sure it's not an industrywide bailout," he said. "This is specifically to help the people who went from renting to home ownership and didn't quite perceive that home ownership is more than renting."

He noted that rate relief is especially welcome for Florida homeowners who may have been surprised by the size of their property tax bills.

"At least there won't be a double whammy for those borrowers," he said.

The White House plan is aimed at stemming the foreclosures that have shot up to record highs as the housing market has gone from boom to bust.

Subprime borrowers - primarily those with tarnished credit or low incomes - have been hardest hit by the meltdown. Initially low interest rates that reset to much higher rates have clobbered those borrowers. Nearly 2-million adjustable-rate subprime mortgages will reset from introductory rates of about 7 percent to 8 percent to higher rates this year and next, raising the specter of even more people being forced out of their homes because they cannot keep up with their monthly payments.

Home foreclosures surged to an all-time high in the July-September period. The Mortgage Bankers Association reported that the percentage of all mortgages that started the foreclosure process in the third quarter jumped to a record 0.78 percent, surpassing the previous record of 0.65 percent of all mortgages in the second quarter.

Times staff writer Becky Bowers contributed to this report, which used information from the Associated Press. Becky Bowers can be reached at bbowers@sptimes.com or 727 893-8859.

[Last modified December 7, 2007, 01:59:04]