cavalry to rescue?
Marketwatch.com story re Wall Street Journal update report on rumored agreement among banks to not raise mortgage rates when adjustable loans are ready to re-set as way to choke off the seething flood of foreclosures. This won’t solve the more general confidence problem re valuation of complex structured finance securities. But WOULD address the heart of the Main Street problem. Not a “bail out” of Wall Street as sophomoric dogmatists whine, since the lenders would be taking the hit. Treasury’s role seems to be “guidance” — and by getting all the cats in the pool assuring something like level playing field.
U.S. Government, Banks Finalizing Rate-Freeze PlanBy Chris Oliver
Nov. 30, 2007
HONG KONG (MarketWatch) — The U.S. Federal government and leading financial institutions are finalizing details of a plan that would extend low introductory rates offered to some borrowers who took out adjustable rate mortgages, according to reports.
The plan, being hammered out between the Treasury Department and a number of large mortgage lenders, would include subprime mortgage borrowers, the Wall Street Journal reported Friday, citing unnamed sources familiar with the negotiations.
The report said the gist of the plan was to extend the low introductory rates on home loans made to borrowers who will have trouble meeting higher reset rates. Under one scenario, the extension of lower rates could run as long as seven years, the report said.
About two million adjustable rate mortgages are scheduled to reset to higher levels over the next two years.
