Bush’s Mortgage Relief Plan Fosters Ongoing Debate
It’s in the news and fostering a mountain of debate. The Bush administration, in concert with the mortgage industry, has embarked on a controversial project aimed in picking winners and losers from the aftermath of the subprime-mortgage meltdown. Detailed in the recent White House plan, the industry would voluntarily help as many as 1.2 million homeowners who are heading for trouble paying their subprime mortgages. For some homeowners, loan-servicing companies will agree to freeze mortgages at their low introductory rates. In other cases, credit counselors or loan servicers will walk mortgage holders through refinancing processes.
However, the deal won’t provide relief to many subprime-mortgage holders including borrowers who are now in foreclosure, have already refinanced their homes or are more than 60 days delinquent on more than one payment over the past year. In some cases, people with good credit scores will also be excluded. The program will be closely watched in financial markets around the world, where subprime defaults have triggered steep write-downs and constrictions in credit markets. Many banks and investment funds invested in complex securities backed by subprime mortgages, which promised high returns but are now battered and difficult to value.
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