MSNBC, Reuters, and The Wall Street Journal were reporting early Friday that the United States Treasury is about to announce a plan to help some subprime borrowers save their homes from foreclosure.
The plan apparently involves an agreement between the Treasury and leaders of the mortgage industry to hold rates steady on many adjustable rate mortgages that are facing rate resets that might shoot payments up hundreds of dollars a month.
According to the Journal, Wells Fargo, Citigroup, Washington Mutual, and Countrywide
Financial may be participating in the plan. These large lenders and mortgage
servicers are part of a coalition announced earlier called the Hope
Now Alliance. Members of the Alliance represent 84 percent of the subprime
servicers and mortgage counselors.
Details are still being worked out but an announcement of the program may come as early as next week. It is expected, however, that some troubled borrowers may be temporarily allowed to retain the low introductory or “teaser” interest rates that allowed them to get into the loans
The major stumbling block to implementing such a plan will be that many of the loans are in packages that were purchased by investors who may be unwilling to go along with lenders, servicers, and the government in what will have to be a voluntary program.
The stock market reacted strongly to the news with Freddie Mac stock up $3.90 and Countrywide up $1.60 in mid-morning trading.