Hope Now Alliance, a coalition of lenders, servicers, investors and community groups, put together by the Treasury Department, is working on a version of a rate freeze to forestall upcoming ARM resets. Details of the Hope Now plan have not been finalized, according to Kurt Pfotenhauer, a senior vice president for government affairs with the Mortgage Bankers Association, which is part of the Alliance.
For a borrower with an adjustable rate mortgage (ARM) at 7 percent on a $200,000 loan, a freeze would mean substantial savings. If the loan were to reset to 10 percent, the monthly payment would jump from $1,331 to $1,755. Judging from other lenders’ plans, a reset freeze would be available only to those borrowers judged unable to make payments at the reset rates.
A freeze was proposed in early October by Sheila Bair, chairwoman of the Federal Deposit Insurance Corporation (FDIC), according to FDIC spokesman, Andrew Gray. It has been well received. Both the Wall Street Journal and the New York Times endorsed it. Bair first had the idea in April, said Gray. But in September, Moody’s revealed that only 1% of ARM borrowers with loans that reset to higher interest rates in 2007 were modified in any way.
source: sundaymorningtalk.com
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