Plan to Freeze Interest Rates Gaining Momentum

The Treasury Department’s initiative to freeze interest rates for some subprime loans seems to be gaining momentum. The major lenders involved appear to be on board and are willing to play a positive role. Here are some interesting reactions on the plan (from MSNBC):

Fannie Mae:

Daniel Mudd, chief executive of government-backed mortgage finance company Fannie Mae called it a “positive step,” saying that many borrowers will be able to avoid foreclosure if they are given more time. “You need time to cure” the problems, Mudd said.


Angelo Mozilo, chief executive of Countrywide Financial Corp., the nation’s No. 1 mortgage lender, said his company will play a major part in the initiative. “Since we all played a role in creating the problem, we all ought to play a role in solving” it, he said.

Securities holders, obviously, are not as terribly excited about the plan. They purchased the mortgage securities expecting a certain payoff and an interest rate freeze would dilute their returns. However, I’d think they’re still better off take a loss today, than losing more later when the rate reset pushes the loans into default. They aren’t budging though:

The plan faces resistance from some on Wall Street who say the government shouldn’t press the owners of loans held in complex mortgage securities to alter them if it’s not investors’ best interest to do so. They warn of a flood of lawsuits.

There is a Nepalese saying which captures my true feelings on this, however it’s hard to translate! E-mail me if you’d like to hear it!

This site is for informational purposes only. It is not sponsored or in any way affiliated with the government. If you are in need of a mortgage loan, consult with a licensed mortgage professional. All fair housing and equal housing opportunity laws apply when applying for a mortgage or buying a home. Copyright 2012.