With the monthly payments on millions of subprime and interest-only loans set to rise in 2008, both the government and banking sector have been working to stave off more waves of defaults and foreclosures.
Treasury Secretary Henry Paulson has been holding talks with
major players in the mortgage industry over the past several weeks to work out a program that would freeze the lower introductory rates
(and mortgage payments) to keep them from going up over the next few years. The plan is meant to target homeowners who are not in default on their
loans at the current payment levels, but whose incomes would not
support the higher payments caused by an interest rate adjustment.
Paulson recently announced that he is confident that the deal will go through. One of the major points of contention is how long the freeze should last, with recommendations varying from as short as one to up to seven years.
Acceptance of the Paulson plan doesn't show a newfound altruism on the part of mortgage lenders. It's very much in their best interest to keep good loans on the books and more properties of the foreclosure market. That will give the housing market time to clear inventory, which should happen much faster now that HotPads.com offers for-sale listings nationwide.
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