Mortgage Foreclosure & Refinance Resource

According to a BusinessWeek article, Treasury Secretary Henry Paulson is confident there will soon be an agreement to help thousands of homeowners avoid mortgage defaults by temporarily freezing their interest rates. Paulson and other top Treasury officials have been holding talks with major players in the mortgage industry over the past several weeks to hammer out an agreement that would freeze the lower introductory rates to keep them from resetting to higher levels for a period of years.

What kind of message does that send to people who are currently in the fixed rate mortgages? Those who were responsible with their fiscal planning and realized that teaser rates will hurt them in the long run made the prudent decision to take a fixed rate and pay higher rates up front. Now, those who irresponsibly took out loans that they can’t afford are being rewarded for that gamble by the lower rates being frozen for years to come making their mortgages very attractive. Yes, the banks avoid foreclosures, some stability in the credit markets to be able to sell their mortgage paper, but what about the responsible borrowers, who will freeze their payments.

It’s clear that something needs to be done to avoid a massive meltdown in mortgage industry but at what cost? It sounds very irresponsible to reward those who are responsible for the problem.

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 2008. Those resets will push the payment on a typical mortgage up by $350 per month, taking it from $1,200 currently to $1,550.