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U.S., Banks Near A Plan to Freeze Subprime Rates
The Wall Street Journal (excerpt) ^ | November 30, 2007 | Deborah Solomon and Michael M. Phillips

Posted on 11/30/2007 1:38:02 AM PST by HAL9000

Excerpt -

WASHINGTON -- The Bush administration and major financial institutions are close to agreeing on a plan that would temporarily freeze interest rates on certain troubled subprime home loans, according to people familiar with the negotiations.

An accord could reassure investors and strapped homeowners, both of whom are anxious as interest rates on more than two million adjustable mortgages are scheduled to jump over the next two years. It could also give a boost to the Bush administration, which is facing criticism for inaction amid the recent housing turmoil.

The plan is being negotiated between regulators including the Treasury Department and a coalition of mortgage-related companies including Citigroup Inc., Wells Fargo & Co., Washington Mutual Inc. and Countrywide Financial Corp. People familiar with the talks say the individual members have agreed to follow any agreement reached by the coalition, which is called the Hope Now Alliance.

Details of the plan, which could be announced as early as next week, are still being worked out. In general, the government and the coalition have largely agreed to extend the lower introductory rate on home loans for certain borrowers who will have trouble making payments once their mortgages increase.

~ snip ~


(Excerpt) Read more at online.wsj.com ...


TOPICS: Business/Economy; Front Page News; News/Current Events
KEYWORDS: anothergovtprogram; bailout; cfc; credit; fed; hopenow; hopenowalliance; housing; housingbubble; interestrates; lending; mortages; mortgage; payoff; subprime; subsidy; sumprime
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To: jude24
So do you want the banks to, contrary to their own self-interest, foreclose upon those houses?

I want the banks and the borrows to work it out without using tax dollars or credits. If it is truly contrary to the banks self-interest to foreclose, why should we worry about them foreclosing?

61 posted on 11/30/2007 5:31:10 AM PST by thackney (life is fragile, handle with prayer)
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To: org.whodat

We’ll see but I haven’t seen that in print so far.

It could also be that it simply took some prodding and that if the banks got together on their own they could be in violation of federal rules/laws which are likely nearly countless. I don’t know...


62 posted on 11/30/2007 5:34:33 AM PST by DB
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To: thackney

Because the banks packaged the debt in bundles and sold them off to other entities, such as hedge funds. The hedge funds et al in turn used them as collatarol for loans from banks. When the value of the bonds drops far enough, the holders will try to get some of their money bank by holding a fire sale that will drop real estate prices in every area where the loans were made...


63 posted on 11/30/2007 5:36:19 AM PST by durasell (!)
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To: thackney
It's my understanding that no Treasury dollars will be involved. The Treasury is involved only to facilitate the agreement among the banks. This is a private-sector solution which has only been facilitated by the Treasury. (See here.)
64 posted on 11/30/2007 5:36:49 AM PST by jude24 (Quis custodiet ipsos custodes?)
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To: thackney

A good number of these loans are Freddy Mac and Fanny Mae based. Many regulations... To alter the contractual terms of a loan made through these organizations may require government approval.


65 posted on 11/30/2007 5:38:20 AM PST by DB
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To: jude24
From your link:

Summers argues that more is needed to keep money flowing to creditworthy home buyers, using the Federal Housing Administration, Freddie Mac (FRE), and Fannie Mae (FNM)—huge government-chartered entities that buy mortgages and package them into securities. He suggests that the government may even need to provide loans directly, or extend tax breaks to stretched families.

66 posted on 11/30/2007 5:39:46 AM PST by thackney (life is fragile, handle with prayer)
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To: bert
I didn’t mention how many square feet the permit was for... That was a big factor...

Though it is still thievery...

67 posted on 11/30/2007 5:40:28 AM PST by DB
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To: thackney

Research Freddie Mac and Fannie Mae and congressional directives from about 10 years ago... I think you’ll find the root of the problem...


68 posted on 11/30/2007 5:42:18 AM PST by DB
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To: DB

I understand this didn’t just start. I would prefer to not see it continue for many decades by continuing use of government funds that keep encouraging bad business transactions by bailing them out.

I think shady lenders 5 years from now will point to bail-outs today to encourage under-informed borrowers to sign on more bad deal loans.


69 posted on 11/30/2007 5:46:54 AM PST by thackney (life is fragile, handle with prayer)
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To: thackney

Larry Summers is an academic. He plays no policy role.


70 posted on 11/30/2007 5:49:44 AM PST by jude24 (Quis custodiet ipsos custodes?)
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To: thackney

Well I too am totally opposed to any bail outs.

Anyone that proposes one won’t get my vote (like that matters much).

But it makes perfect sense for lenders to delay their reset dates in order to reduce the bleeding they’re currently doing. As I said before there could well be legitimate reasons for the government to be involved with making that happen. We’ll have to wait and see what the details actually are.


71 posted on 11/30/2007 5:51:04 AM PST by DB
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To: HAL9000

Freezing rates will merely reduce the availability of money to lend. Rate = risk. High risk, high rate. Prove your worthiness, lower risk, refi at a better rate. It’s not rocket science!


72 posted on 11/30/2007 5:53:03 AM PST by JimRed ("Hey, hey, Teddy K., how many girls did you drown today?" TERM LIMITS, NOW!)
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To: Cap Huff

European = You’re a pee on.


73 posted on 11/30/2007 5:53:20 AM PST by central_va
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To: central_va

“European = You’re a pee on.”

Can you please explain just what you mean?


74 posted on 11/30/2007 5:55:27 AM PST by Cap Huff
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To: Does so

My first house, built 1946, had, I believe, a 40-amp service. Four breakers total! When I sold it in 1992, the buyer insisted I either replace the breaker box or give her a $1K credit. (Sales price $133K) I gave her the $1K credit and thought I was getting a great deal.

Great deal or not, that house was worth about $590K last I checked and is probably right around $500K now.


75 posted on 11/30/2007 5:59:17 AM PST by Attention Surplus Disorder (This post sold by weight, not volume. Content may have settled during shipment.)
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To: HAL9000

Now I’m going to sit back and wait for the lawsuits from the million people who’ve already lost “their” homes because the rest were bailed out while they lost theirs.


76 posted on 11/30/2007 6:14:25 AM PST by HeartlandOfAmerica (The way to stop discrimination on the basis of race is to stop discriminating on the basis of race.)
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To: HAL9000

If banks do this because it makes more sense than foreclosure, fine.

Not sure why the Treasury department is involved.


77 posted on 11/30/2007 6:15:44 AM PST by RockinRight (Just because you're pro-life and talk about God a lot doesn't mean you're a conservative.)
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To: JimRed

So will foreclosing on the properties, wouldn’t it?


78 posted on 11/30/2007 6:16:30 AM PST by RockinRight (Just because you're pro-life and talk about God a lot doesn't mean you're a conservative.)
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To: DB

Actually, not many of them are. Fannie and Freddie have a very small number of adjustable-rate loans that are not A-paper loans. Unless the A-paper loans are also included in this, then I’ll stand corrected.


79 posted on 11/30/2007 6:17:56 AM PST by RockinRight (Just because you're pro-life and talk about God a lot doesn't mean you're a conservative.)
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To: org.whodat

It appears, from what I see here, that the Treasury is only helping in the negotation process and nothing more.

If that’s the case, I can accept that.


80 posted on 11/30/2007 6:19:00 AM PST by RockinRight (Just because you're pro-life and talk about God a lot doesn't mean you're a conservative.)
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