On 5 Dec 2007
SUV Bailout To Keep America Humming,
OK, so what happens five years from now, what is the rate the mortgages will be frozen at, and what about investors who thought they were going to get those honkin' big checks? What if that was their retirement plan?
Dec. 5 (Bloomberg) -- Federal regulators and U.S. lenders agreed to freeze interest rates on subprime mortgages for five years to stem rising foreclosures, said a person familiar with the measure.
President George W. Bush will announce the accord tomorrow, which was negotiated by officials including Treasury Secretary Henry Paulson. Paulson will hold a press conference at 1:45 p.m. in Washington to discuss the plan, Treasury said in a statement.
``We have got to do something drastic, and we have to do something quickly,'' said Representative Elton Gallegly, a Republican from California. ``I don't like the government getting involved in the private sector, but we have potential problems we are already seeing come to pass.''
Paulson finalized the deal as the housing recession entered a third year, threatening the economic expansion. The collapse in the market for securities backed by subprime mortgages cost the chief executive officers of Merrill Lynch & Co. and Citigroup Inc. their jobs, roiled markets from Auckland to New York and forced the Federal Reserve to cut interest rates twice.
More than 30 percent of borrowers with subprime adjustable- rate mortgages are behind on their payments before their loans reset higher and 775,000 homes with $143 billion of mortgage debt will go into foreclosure over the next two years, according to estimates from analysts at Credit Suisse Group.