Hope Now Begins To Move Forward

Jan 18th, 2008 @ 5:36 PM by Alden Smith

 The government is moving forward with its plan to help the struggling mortgage market, with such banks as Citigroup, Countrywide Financial, Washington Mutual and Wells Fargo offering to help people facing foreclosure.  Hope Now, the government entity, is creating a “Mortgage Rate Freeze” program to help those who struggle.

The Pros & Cons

This is well and good, but you have to wonder why this might help the overall economy.  Why?  Because the requirements for accessing the program effectively weeds out a lot of people that are struggling.  Requirements such as being current on payments, never have had a payment over 60 days late, and cannot be 30 days overdue at time of entry into the program.  That really weeds out a lot of people currently in trouble.  Estimates of those who could be helped range from 1.2 million people to as few as 425,000.  Considering the number of people currently in financial difficulty with ARM’s due to reset soon, a lot of people will still be left out in the cold.

The plan of course would help the people who qualify.  They would be able to get a rate freeze on a typical 80% mortgage loan that would help them considerable in keeping their homes.  Banks and lenders will also benefit, because there will be less total loss for them.  The freeze would be for five years, allowing the home owner to build a decent equity in the home.

The Players

One of the biggest drawbacks with this plan is the fact that it has been tough for the government to get investors to buy into it.  If banks freeze the interest rates, then they will violate a basic promise to investors to benefit from a return in investment.  Expect to see lawsuits because of this action by the government.

Whether or not this will stimulate the economy in any way remains to be seen.  If some people can keep their homes, that is a good thing.  One has to wonder, however, what will happen in the arena of investors, investment banks, and mortgage lenders.  Will this upheaval negate any possible good that would come from this plan?  Once again, we wait and see.

One Response to “Hope Now Begins To Move Forward”

1. » Hope Now Begins To Move Forward says:

   January 19, 2008 at 1:05 pm

   [...] admin wrote an interesting post today onHere’s a quick excerptThe government is moving forward with its plan to help the struggling mortgage market, with such banks as Citigroup, Countrywide Financial, Washington Mutual and Wells Fargo offering to help people facing foreclosure. … [...]