U.S. President George W. Bush outlined on Thursday steps the administration is taking to help American homeowners and called on Congress to join him in delivering relief to homeowners in need.
Under a plan negotiated by the administration with the private sector, up to 1.2 million homeowners could be eligible for assistance, Bush announced.
Many individual homeowners feeling financial stress have "adjustable rate mortgages," which typically start with a lower interest rate and then reset to a higher rate after a few years.
The plan, or HOPE NOW, is designed to help subprime borrowers who can at least afford the current, starter rate on a subprime loan, but will not be able to make the higher payments once the interest rate goes up, according to a press release issued by the White House.
"We should not bail out lenders, real estate speculators or those made the reckless decision to buy a home they knew they could never afford," Bush said. "But there are some responsible homeowners who could avoid foreclosure with some assistance."
The plan will freeze introductory "teaser" rates on certain subprime mortgages, preventing rates from rising for five years.
However, this offer will apply only to people living in their homes and who have not missed any payments at the lower rate. It also only would apply to loans taken out between 2005 and this past July 30 and scheduled to rise to higher rates in 2008 and 2009.
The hope is that the five-year freeze will buy time for the housing sales and prices to start rising again. Such a rebound would enable homeowners to refinance their current adjustable rate mortgages into fixed-rate loans with more affordable monthly payments.
Other homeowners will get assistance in refinancing with their lenders and moving into loans secured by the Federal Housing Administration, said the president.
Meanwhile, Bush urged Democrats-controlled Congress to move more quickly to pass legislation designed to help homeowners.
The announcement came after a report issued earlier Thursday by the Mortgage Bankers Association showed that home foreclosures surged to an all-time high in the third quarter.
The percentage of all mortgages that started the foreclosure process in the July-to-September period increased to a record 0.78percent, surpassing the previous record of 0.65 percent of all mortgages in the second quarter, according to the report.
Source: Xinhua
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