President Bush announces partial foreclosure relief

Alongside Treasury Secretary Henry Paulson, President Bush announced today that the administration will implement a foreclosure relief plan that is meant to prevent the rampant rhythm of foreclosures in the country. With estimates of $2.4 million homeowners at risk of losing their home to foreclosure due to adjustable rate mortgage resets, there had been suggestions for quite some time that the government would intervene to minimize the effect of excessive foreclosures on the overall health of the economy. And that intervention came today with the plan that aims to "freeze" the low inital rates of certain subprime mortgages for a period of 5 years to keep homeowners from foreclosing once rates adjust upward. The number of homeowners that would actually qualify for this modification of loan terms varies anywhere from 8-12 percent of the homeowners facing rate adjustments through 2009. According to the plan’s criteria, owner occupants would qualify only if they are no more than 30 days late on their mortgage (and no 60 days late within the past 12 months), In addition, homeowners who cannot afford payments event at the initial (teaser) rates would not qualify either. Lastly, the rate reset has to be scheduled in 2008 and not prior.

One could argue that at this point any help, partial as it might be, is better than no help. However, reading through the details of the plan, one cannot help but think that considering the heavy "securitization" of subprime mortgages and the numerous roadblocks to qualify for the program, implementing it in an efficient manner will be no easy task.

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