Reactions mixed on White House mortgage rate freeze

Daily Record (Rochester, NY), Dec 13, 2007 by Danielle Derringer

Many area real estate experts are skeptical that President George W. Bush's widely lauded mortgage rate freeze will do much to help those in the most dire straits.

The Bush administration announced late last week a new plan designed to help with the mortgage crisis unfolding in the United States. With many stipulations, many area professionals are unclear on exactly just how many people the plan may help.

The plan seeks to freeze rates for certain subprime mortgages and will be available only to homeowners who are living in the homes and have not fallen behind on payments, according to the National Association of Realtors (NAR).

Also excluded are those who can afford higher payments, with the administration expecting those homeowners to sell their current home and move into a new one as soon as they can refinance with a more affordable, fixed-rate loan.

"The plan the president has put out there is to help those individuals who really can overcome the jump in the rates and just need a little assistance," said Peter Stoller, director of government affairs for the Greater Rochester Association of Realtors (GRAR).

According to NAR, the administration's plan could help 1.2 million homeowners either through a rate freeze or refinancing assistance.

The Center for Responsible Lending, which battles predatory lending practices, estimates that only 145,000 homeowners will qualify for the freeze because the criteria are too narrow.

"What makes me crazy is that, five years from now, no one knows what the rates are going to be," said Anne Levin, owner of First Funding Network Inc. in Rochester. "They could be 12 percent or higher, then what? ... How about finding a way to help all of these people today?"

Stoller said he, too, is concerned about the plan's qualifications.

"The plan will not pertain to borrowers who have low credit scores, are more than 60 days late on payments and are not full- time employees," Stoller said. "This dramatically limits who the plan will help at all."

Alex Castro, executive director of the Rochester Housing Council, said most foreclosures result when homeowners find themselves in an "upside-down situation."

"In Rochester, the foreclosure problem comes from people who owe more on the property than what the property is worth," Castro explained. "The new plan doesn't address that issue, which sometimes is the bigger part of the problem in the first place."

Castro said a positive point to Bush's plan is that it may allow more time for counseling agencies to work with individuals on credit problems so they can refinance at the end of a five-year period with a lower, fixed rate.

Stoller said the plan will not cut any slack for those who were caught looking to make a quick profit.

"Fortunately, the plan excludes people who bought investment properties hoping to make a quick profit," he said.

According to NAR, homeowners who do not find help in the White House's rate freeze may be able to find some relief in the Fed's cut of the benchmark federal funds rate by one quarter Tuesday to 4.25 percent.

For more information visit www.homesteadnet.com, www.nar.org or responsiblelending.org.