Knoxville (WVLT) - President Bush is scheduled to talk to Americans about the mortgage foreclosure crisis on Thursday. There's a deal in the works that would freeze interest rates for certain sub-prime mortgages.
Liz Tedone has the story.
For millions of Americans, subprime mortgages were an offer they couldn't refuse. They're loans for borrowers with poor credit, and they start out with attractive introductory rates. However, over the next 18 months, about 2 million of those loans are scheduled to re-set, hiking payments by 30-percent or more, and without federal intervention, more than half a million people could go into default.
The government's plan calls on lenders to freeze the lower rates for five years so people don't lose their homes, but if you're already in default or facing foreclosure, you're on your own.
"We have a crisis with homeownership and foreclosures in communities that we haven't seen since the Great Depression," consumer advocate Michael Shea said. "There's nothing in it for people who are already under water."
There's been a 94 percent increase in foreclosures. To qualify for the subprime rate-freeze, borrowers must be current on their payments but unable to afford a higher rate.
Also, it's believed this freeze will only apply to borrowers with loans made at the start of 2005 through July 2007. Currently those rates are due to jump between this coming January and July 2010.