President Bush recently signed legislation to freeze the introductory 2 year "teaser rate" on all subprime loans for an additional 5 years.  The rate freeze will apply to loans taken out between January 1, 2005, and July 30, 2007, and scheduled to rise in 2008 and 2009.  This is designed so that on the 25th month of a 2/28 subprime ARM your interest rate does not adjust (up) and increase your monthly payment by $100s of dollars. 

Truth be told that this is nothing more than a political move. It looks like Bush is doing something substantial, but it really has no impact.  This is what my father likes to call "Air & Scenery", because it really cannot help nearly as many people as they are predicting. 

Consider this;... one of the criteria to qualify for the rate freeze is to not have been 30 days late since the current loan has been in place. There were so many good 100% financing programs available 1 year ago that good borrowers did not have to get subprime loans for these purchases. I would speculate that 75% (or more) of the subprime loans originated 2 years ago were for legitimate subprime borrowers who had sub 600 FICO scores. I would venture to guess that well over half of these people have been late on their mortgage in the last 18 months.

This means that of all the subprime loans that are "targeted" for this interest rate relief - over 50% of them will not qualify due to their mortgage history.  This does not even consider the other criteria for this rate freeze.  The sad truth is that probably less than 25% will get any benefit from this maneuver. 

 Arm yourself with knowledge!

JIM CUNNINGHAM

Community First Financial, LLC

7575 E Redfield Rd   Suite 235

Scottsdale, AZ  85260

480-305-8900 ext 305 - office

480-907-2435 - fax

602-434-8261 - cell

jcunningham@communityfirstfinancial.com

http://www.communityfirstfinancial.com/

http://www.jimcunninghamcff.blogspot.com/

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