US Secretary of the Treasury Henry Paulson said on Monday an agreement was near on a proposal to help thousands of at-risk US homeowners avoid foreclosures by temporarily freezing their mortgage rates.
One of the last remaining issues to be resolved, officials said, was the exact length of time the low-teaser rates will be frozen.
Speaking at a national housing conference sponsored by the Office of Thrift Supervision and in later interviews, Paulson expressed optimism that an agreement could be reached very soon, possibly before the end of this week.
"We are working aggressively and quickly, utilizing available tools and creating new ones, to help financially responsible but struggling homeowners," he said.
An estimated 2 million subprime mortgages, loans offered to borrowers with spotty credit histories, are scheduled to reset to much higher levels by the end of next year. Those resets will push the payment on a typical mortgage up by US$350 per month, taking it from US$1,200 now to US$1,550.
Some government regulators are pushing for the low "teaser" rates to remain in place for five to seven years, arguing that a longer period of time is needed to allow the depressed housing market to begin recovering and for home prices to stabilize, which will allow homeowners to finance under better terms. But investors, who will see lower payments on the loans, are arguing for a shorter period of time.
Regulators indicated that the rate freezes will only be available for owner-occupied homes to avoid granting the break to real estate speculators.
"How you structure [the rate freeze], who gets it and for how long, I think, is what people are struggling with," Comptroller of the Currency John Dugan said.
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