The Bush Administration is quickly moving forward to closing a pact with major lending institutions that will freeze the rates on certain sub prime mortgages.  This is certainly good news for those facing foreclosure.  Details are still being worked out, but it looks as if this is a go.

The Players

The big guns are the ones being approached with this pact.  We will see The US Treasury Department and big mortgage firms like including Citigroup Inc (C.N), Wells Fargo & Co (WFC.N), Washington Mutual Inc (WM.N) and Countrywide Financial Corp (CFC.N) taking part in this.  It is Countrywide that interests me.

As usual, thrown into the mix is determining which homeowner to target and how long the freeze will last.  The pact, called the Hope Now Alliance, expects the freeze to last on these mortgages for seven years.

In California, The Governator is working with 4 top mortgage lenders in a deal to allow borrowers facing unaffordable resets to keep their lower initial rates five more years if they live in their homes and continue to make payments on time.

Heads Are Rolling

Several top execs in the mortgage business have been asked to step down in an effort to reassure the folks on Wall Street that they mean business in cleaning up the mortgage mess.  Investment banks have written down $80bn due to the mortgage mess and their images are suffering.

The latest to go was Morgan Stanley’s Zoe Cruz, a 25-year veteran at the firm and one of the most powerful women in the financial world. Merrill Lynch & Co.’s Stan O’Neal and Citigroup Inc.’s Charles Prince have also fallen by the wayside, with blame falling on their shoulders for the condition the companies are in.  One has to wonder how well the golden parachute is working.

CEO Mitch Caplan of online giant E-Trade is stepping down, and there is speculation that Bear Stearns Cos. head James Cayne will be forced to retire early.  All in all, this debacle in the mortgage market is not going away soon.  We hope that lessons are learned.  We also know that it is not all the fault of the lenders, who are after all are in the business of making money.  It is the greed of the American public that has really put us where we are at.  The investment banks have only taken advantage of that.