The Bush administration's plan to give subprime borrowers a break on their mortgages is already catching flak from an unexpected source: other homeowners.
Treasury Secretary Henry Paulson, at a housing conference yesterday, said he is "aggressively pursuing" an agreement with lenders and investor groups to freeze rates on subprime adjustable-rate mortgages at their original levels. The proposal, aimed at helping homeowners who would fall behind in their payments at higher rates, is designed to prevent a surge in foreclosures next year. About 1.5 million subprime adjustable-rate mortgages are scheduled to reset to higher rates in 2008.
But as outlines of the plan become known, some homeowners are complaining that the effort isn't fair to borrowers who didn't overextend themselves. Others argue that the government shouldn't be involved in perpetuating a housing bubble that needs to deflate. A key question: How far should you go to help borrowers who can't pay their bills?
"People have to be responsible for their own actions," says Harry Lancz, a small-business owner in Traverse City, Mich. He holds a pair of fixed-rate mortgages, one for his primary residence, which has been for sale for six months, and one for a second home in Louisiana. "What are you going to do when their credit cards get due and they can't pay? Are you going to bail them out on that, too?"