Forclosure Relief Plan Unvieled by President Bush

President Bush has announced a plan to offer foreclosure relief to 1.2 million homeowners.

According to the details outlined in an article today in Rismedia, this plan includes a freeze on low, introductory mortgage interest rates that could increase significantly over the next few years.

The plan has a limited scope though. Only those who are current with their mortgage payments are eligible. It also only covers those adjustable rate mortgages with rates that are set to reset in 2008 and leaves out any who are deemed capable to continuing to make the higher payments and the new higher rate.

According to the Rismedia article some industry experts calling it “a step in the right direction.” This plan includes an agreement with the Bush administration and mortgage industry with the mortgage industry administering the rate freeze and the investors who purchased the loan. The agreement also sets conditions under which rates on certain loans could be temporarily frozen. It isn’t binding, but because it has the support of major investors, it is expected to give loan servicers much more flexibility to quickly rework some loans and direct other borrowers toward refinancing, reports said.

This plan only applies to originated between Jan. 1, 2005, and July 31, 2007, that reset between Jan. 1, 2008, and July 31, 2010.

This aid is only available to those who ask. There is a hotline you can call: 1-888-995-HOPE.

In the Rismedia article Andrew Jakabovics, associate director ofor the Economic Mobility Program, released a statement saying, “It has taken a while, but even the Bush administration, long in denial about the broad negative effects the mortgage crisis is having on individual borrowers, entire neighborhoods, and the national economy, has come around to recognizing that there is a necessary and appropriate role for government in solving the problem. As with other serious crises that have happened on Bush’s watch, the solution is to make it the next administration’s problem.”

He continued, “The five-year freeze is a welcome opportunity for the subset (no more than 30 percent) of borrowers put into suspended animation. But it also fails to address the needs of the people whose rates have already reset or the growing number of borrowers who are creditworthy but have negative equity in their homes as a result of widespread foreclosures and who have no way to get out of their challenging loans. It also does nothing to restore faith in the smooth operation of our financial system, when breakdowns in the credit market can accelerate the economic downturn or contribute to a recession. The administration can and should do more.”

There has been criticism of the Bush administration for not addressing the mortgage crisis in a more timely manner. Bush is now encouraging Congress to pass mortgage relief legislation. Bush is also careful to note that this is not a government bail out with no federal funds being used for the program.