WASHINGTON - U.S. President George W. Bush announced a plan on Thursday aimed at slowing a wave of home loan foreclosures that has threatened to knock the U.S. economy into recession and rattled investors worldwide.
Bush said the plan, hammered out by the U.S. Treasury Department in talks with mortgage industry leaders, was not intended to "bail out" lenders, speculators or those who knew they could not afford the homes they bought.
Instead, the Bush administration hopes that it can help many of the two million homeowners who took out adjustable-rate loans with payments due to move sharply higher soon by offering some of them a five-year mortgage-rate freeze.
Bush also urged Congress to pass legislation to reform the tax code to help homeowners refinance their mortgages.
Officials fear 500,000 Americans are at risk of losing their homes as $367 billion (181 billion pounds) worth of adjustable-rate subprime mortgages reset to higher interest rates in 2008 and 2009.
The Mortgage Bankers Association said foreclosures reached a record high in the third quarter, with 1.69 percent of loans outstanding in the foreclosure process. Late payments on mortgages hit the highest level since 1986.
Bush said an estimated 1.2 million homeowners could be eligible for assistance to avoid foreclosure over the next couple of years. However, private-sector analysts said the numbers would likely be much lower.
"In theory, the plan could help as many as 750,000 subprime homeowners," said Mark Zandi, chief economist for Moody's Economy.com. "In practice, my sense is that it will probably help at best about 250,000 homeowners."
The rate freeze is aimed at owner-occupied homes, not those bought by speculators hoping to profit when the housing market was booming.
'HUGE GOVERNMENT GIVEAWAY'
Under the plan, homeowners who have shown they are a reasonable credit risk, but who could not afford their homes with higher mortgage rates, would qualify for "fast-track" loan modification and the five-year interest rate freeze.
Borrowers who can afford the current loan terms would get help refinancing, but those who cannot and were poor credit risks would probably still lose their homes.
