The Times, Trenton

Relief Proposed For Mortgage Crisis: Aid Available To Many – But Not All

The Times of Trenton — Friday, December 7, 2007

Newhouse News Service

President Bush's rescue plan for homeowners struggling to keep up with mortgage payments isn't designed to help everyone.

In announcing the plan yesterday, the president himself acknowledged "there is no perfect solution," and Treasury Secretary Henry Paulson conceded it's "not a silver bullet."

Still, more than 1 million homeowners stand to gain some relief from the measures the Bush administration negotiated with the mortgage industry. For some homeowners with adjustable-rate mortgages, that could include a freeze on "teaser" rates set to jump in the coming months.

"This effort is aimed at families who find themselves able to make payments today but who will be unable to pay when their adjustable rate loans reset," U.S. Treasurer Anna Escobedo Cabral said in an interview after the president unveiled the plan.

To answer questions homeowners may have about the plan, The Star-Ledger interviewed a number of housing and finance experts, including Cabral; Jim Shilling, a real estate professor at DePaul University; Bill Bost, a mortgage banking attorney for Ragsdale Liggett in Raleigh, N.C.; Ellen Bitton, president of Park Avenue Mortgage Group, a mortgage broker in New Jersey; and Phyllis Salowe-Kaye, director of New Jersey Citizen Action.

How do I qualify for assistance? The loans had to have been originated between Jan. 1, 2005, and July 31, 2007. Private lenders, with encouragement from the federal government, will assist borrowers who are facing financial difficulty. Contact your lender or call a toll-free number, (888) 995-4673, to speak with a counselor to explore your options.

How does the freeze on teaser rates work? Loan rates would be frozen for a period of five years for borrowers who qualify, and if the lender agrees. This was a compromise because lenders wanted a freeze for only two years, and federal regulators wanted to push it out to seven years.

Who is eligible for the freeze? Borrowers who are current on their loan payments but ineligible for refinancing because of their poor credit ratings. If they qualify, and if lenders agree, their rates could be frozen at the introductory rate.

Are there any problems with the plan? It does not address what will happen to borrowers at the end of the five-year period because their damaged credit will make it difficult to get out of their home and buy another one. It also does not help people who are already in foreclosure on their homes and are in danger of losing them within the next year.

Is there any relief for people trying to obtain jumbo loans? No. Many New Jerseyans must find such loans because the cost of housing is so high. It is difficult to obtain a jumbo mortgage – above $417,000 – without proper documentation. Rates for those loans are about 0.75 percent higher than they would be in a normal market.

Where can I get more information? Check the Web site of Hope Now (, a nonprofit consortium of lenders, securities firms and credit counseling agencies.

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