US govt, banks near deal to freeze subprime rates - report |
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Fri, 30 Nov 2007 09:39
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LONDON (Thomson Financial) - The Bush administration and major financial institutions are close to agreeing on a plan that would temporarily freeze interest rates on certain troubled subprime home loans, according to people familiar with the negotiations, the Wall Street Journal reported.An accord could reassure investors and strapped homeowners, as interest rates on more than 2 mln adjustable mortgages are scheduled to jump over the next two years. It could also give a boost to the Bush administration, which is facing criticism for inaction amid the recent housing turmoil.The plan is being negotiated between regulators including the Treasury Department and a coalition of mortgage-related companies including Citigroup Inc, Wells Fargo & Co, Washington Mutual Inc and Countrywide Financial Corp.People familiar with the talks say the individual members have agreed to follow any agreement reached by the coalition.Details of the plan, which could be announced as early as next week, are still being worked out. In general, the government and the coalition have largely agreed to extend the lower introductory rate on home loans for certain borrowers who will have trouble making payments once their mortgages increase.The mortgage servicers in the coalition represent 84 pct of the overall subprime market. The coalition also includes lenders, investors and mortgage counsellors.Top Treasury officials fear that unless creditors agree to relax the terms on many of those mortgages, borrowers will default at a higher pace. About 6.6 pct of subprime mortgages were in foreclosure as of August, the most recent data available, according to First American LoanPerformance.tf.TFN-Europe_newsdesk@thomson.comraCOPYRIGHTCopyright Thomson Financial News Limited 2007. All rights reserved.The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
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