Real Estate Update in Palo Alto & Los Altos

The plan:

Lenders will freeze low introductory rates on certain subprime mortgages for a number of years.

Who’s proposing it:

The Bush administration and the mortgage industry, including the FDIC and many of the biggest lenders.

Funding:

President Bush has said no taxpayer money will be used for the plan. Instead, investors who bought mortgage-backed securities would lose some income while the freeze is in effect.
When the proposed plan will take effect: Details are still being negotiated, but it could be unveiled in the next day or two.

Winners:

Holders of certain subprime mortgages with adjustable rates.

Losers:

Investors in mortgage-backed securities; bargain house hunters.

How much is at stake:

More than 1.5 million subprime loans, worth $330 billion, are scheduled to undergo their first rate reset by the end of 2008, according to the FDIC.

How the plan would help:

The theory is that once the mortgage and housing industry stabilizes, it will be easier for borrowers to refinance, thus keeping their homes and allowing us to avoid a potential economic recession.