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Bush Administrationís 4.5 Loan Rate Aim to Stop Foreclosure

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By : Cassiano Travareli    99 or more times read
Since the start of the financial market crisis, U.S. agencies have focused their attention on rescuing financial institutions hoping that its recovery would also stabilize the housing market and reduce foreclosures. However, their efforts have failed to produce the desired results.

Now, the Federal Reserve and the Bush Administration have decided to focus their attention on ordinary homeowners by proposing several initiatives that are aimed to reduce the number of foreclosed homes.

Federal Reserve Chairman Ben S. Bernanke has warned that the increase in the number of homeowners who are facing the threat of foreclosure will affect the economic recovery efforts.

Bernanke has proposed government-supported loan modifications and tax revenues to help homeowners refinance and keep their homes.

He pointed out that additional initiatives are needed to reduce preventable foreclosures.

Treasury Department officials are proposing to subsidize 30-year mortgage loans with 4.5 percent rate. Under the plan, the agency will underwrite 30-year mortgage loans at rates homebuyers have not seen or experienced for more than 40 years now. They hope that the initiative will help boost the housing market. noted that the 30-year fixed-rate loan declined to 5.58 percentage rate from 5.76 percentage rate. Meanwhile, a drop of 2.55 percent was reported on the 10-year Treasury note.

However, some financial institutions are opposing the Bush Administrationís proposal for a 4.5 percentage mortgage loan rate.

The low mortgages would be made available only for those who will buy houses and not to about 50 million families who already took out loans and homeowners who want to refinance.

The initiative will not provide relief to homeowners who are facing the threat of foreclosure because they had borrowed more than they could afford to pay. It would not also benefit those who pay their mortgages diligently and would re-apply for another mortgage because they just want to avail of the lower rate.
Cassiano Travareli has been educated in the finer points of the foreclosures market over 5 years.

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