The Bush administration is working to combat the country’s severe housing crisis but there is no simple solution, Treasury Secretary Henry Paulson said Monday, adding that a correction in the housing market is "inevitable and necessary."
The country is now facing approximately 1.8 million in subprime mortgages that are scheduled to reset over the next 2 years. The fix… The Bush administration has brokered a deal with the mortgage industry to freeze certain subprime rates for 5 years. Seems very fair to reward the subprime loan holders that helped to put the credit crisis where it’s at, right??? Now we let the prime borrowers who have variable interest rate loans to adjust accordingly. This just doesnt seem right.
He had said that this raised the threat of a market failure and was the reason that a deal was brokered with the mortgage industry. They froze probably the most risky loans (the loans that were made because wallstreet had an appetite for risk) to allow the housing market to recover.
"By preventing avoidable foreclosures, we will safeguard neighborhoods and communities and fulfill our responsibility of protecting the broader U.S. economy," Paulson said in a speech in New York. "However, let me be clear: there is no single or simple solution that will undo the excesses of the last few years."
Paulson said that the deal for the mortgage industry to freeze certain subprime mortgages will not use any tax payer money. Conservative critics have complained that the administration’s plan represented government intrusion in the operation of markets that would end up rewarding some people who had taken out risky mortgages to purchase homes.
Paulson also raised the possibility in his speech that some possibly a "systematic approach" may need to be put together to help homeowners with other adjustable-rate mortga,ges that will reset to higher rates. The current plan will only help subprime mortgages, loans offered to borrowers with weak credit histories.