PLAN TO FREEZE RATES

The Wall street Journal in today's issue wrote about an imminent plan to freeze introductory sub prime interest rates due to reset in the coming months. The specific freeze period and other details are not known yet but this exactly what I have repeatedly suggested as a means to deal with the looming crisis. My point was that since many of the programs that were used to originate those loans have been discontinued by the lenders, a lot of the borrowers can no longer qualify with the new guidelines. This will automatically result in foreclosures because these borrowers will NOT be able to pay the higher monthly notes.

I did call for a moratorium to allow the borrowers to continue to make their current payments so that lenders are compensated and the borrowers remain in their homes. I called the proposal a win-win situation for both parties. In addition I thought that it will be necessary to come up with new programs to convert those adjustable teaser rates into fixed rates and for the lenders to apply their new guidelines to new borrowers. This combination will prevent further deterioration of the housing market in the short term and stabilize it in the long run.
It is still early to see how far the plan will go, but it is a first step toward resolving this difficult situation.

I may wrong about my prediction that there will not be any mote rate cuts before the end of the year because the street is in favor of such move, but at least my repeated support for freezing the rates is on its way to becoming a reality. As they say, you win some and you loose some.
Why don't you send me an e-mail at jpallaa@gmail.com with your comments?