Quick-Fix Rate Freeze Could Be a Shot in the Arm for Financial ETFs
December 6th at 1:00pm by Tom Lydon
President Bush outlined his plan today to freeze interest rates for five years for homeowners with adjustable rate mortgages; could this help financial exchange traded funds (ETFs)? The plan is aimed primarily at borrowers who can currently afford their existing rates and are current on their payments. However, with a reset to a higher rate, these homeowners would likely default. A rate freeze would be possible for loans originated between January 1, 2005 and July 31, 2007, reports Patrick Rucker for Reuters. A "fast-tracked" loan modification would hold their rate steady for five years.
More than 30% of borrowers with subprime adjustable mortgage rates are already behind on their payments, even before their loans reset. Around 775,000 homes with $143 billion in mortgage debt will go into foreclosure over the next two years.
Alison Vekshin for Bloomberg reports that this will be the third consecutive year for a housing recession and for the government to dabble in the private sector indicates problems are beyond serious for the health of the economy.
