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.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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