Help For Subprime May Be on the Way
December 5, 2007
Henry Paulson, the Treasury Secretary, recently announced that an agreement was close at hand that would assist thousands of homeowners who are at risk of losing their homes due to foreclosure. The assistance would come in the form of an interest rate freeze.
At issue now, is the precise length of time that the lower rates, often called teaser rates, would be frozen. The Secretary stated that he feels optimistic that an agreement would be reached, perhaps as soon within a few days.
Henry Paulson along with other federal regulators have been in discussions with the nation’s largest banks, home mortgage investors, and consumer protection groups in an effort to help avoid an flood of possible foreclosures that may take place next year. This huge foreclosure event may forecast an overall decrease in the nation’s economy.
It has been estimated that 2 million sub-prime mortgages will begin to reset to higher interest rates by the latter part of 2008. Sub-prime loans are those loans that were offered to borrowers with weak credit histories.
In many cases, the higher rates will impose severe financial problems for those who fall under them. For example, on a typical mortgage the monthly payment would go up by $350 per month, moving the payment from $1,200 a month to approximately $1,550 per month