On Thursday, December 6, 2007, the Bush Administration revealed a plan to aid homeowners that are today facing losing their homes. During the past few years mortgage companies and various products helped several million individuals across America to purchase homes. However, some of the ways in which these individuals gained loans was not in the best interest of the borrower especially when it came to the subprime sector. Many people took out loans they could not afford and then when the mortgage companies added the mortgages to packages such as securities and sold them throughout the world to various investors the problems increased.

Not only was this occurring behind the borrowers back so to speak, but also many borrowers did not really understand their loan, thus increasing the problem later on down the road.

Treasury Secretary Henry Paulson and Housing and Urban Development (HUD) Secretary Alphonso Jackson along with President Bush spoke Thursday about this mounting problem.

“There’s no perfect solution, but the homeowners deserve our help,” stated President Bush. He went on to explain that government funds will not be used to carry out the plan.

“Lenders and investors would face enormous losses, so they have an interest in supporting mortgage counseling and working with homeowners to prevent foreclosure,” President Bush explained.

He went a bit farther to express that the government is not going to bail out real estate speculators, lenders, or homeowners that knew they could not afford the home they were purchasing.

“Yet, there are some responsible homeowners who could avoid foreclosure with some assistance,” President Bush expressed, stating that some 1.2 million homeowners could be helped.

The plan will place a five-year freeze for borrowers with loans agreed to from January 2005 through July 2007; and those loans must be slated to adjust between January 2008 and July 2010.

For homeowners that do not fall into this bracket they can find assistance in refinance with their lenders or move their loan into loans that are backed by the Federal Housing Administration.

Adjustable rates mortgages may look enticing in the beginning with a low interest rate, however, the rates fluctuant with the economy thus causing problems for homeowners that are barely making their payments before an increase in interest rates. It has been estimated that around 2 million people will go into foreclosure in 2008, due to their adjustable rate mortgage rising to unattainable levels. Some of the new payments are expected to be at as much as 12 percent above what homeowners are paying at this time.

President Bush stated that many homeowners were shoved into a loan they did not understand and that the Fed will announce stronger lender standards that will help borrowers and make the mortgage industry more transparent.

“HUD and the federal banking regulators are taking steps to improve disclosure requirements so that homeowners can be confident they are receiving complete, accurate, and understandable information about their mortgages,” President Bush said.

This entry was posted on Saturday, December 8th, 2007 at 8:40 am and is filed under San Diego Real Estate News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.