The Bush administration's HOPE NOW program

Real Estate Agent with Kilauea Real Estate Company

Declining home prices have put many borrowers in a position where their home is worth less than they owe on their mortgage. When borrowers with ARM loans see their monthly payments increase when low, initial "teaser" rates expire, many have little incentive to continue making payments and end up in foreclosure.

The Bush administration's HOPE NOW program could be finalized by the end of the year and that one scenario involves freezing interest rates on eligible loans for up to seven years. Although freezing interest rates would reduce the yields investors receive from some mortgage-backed securities, they could theoretically face even bigger losses if large numbers of loans in the "pools" that make up the securities end up in default. 

HOPE NOW participants include Bank of America, Citigroup Inc., Countrywide Financial Corp., Fannie Mae, Freddie Mac, First Horizon National Corp., GMAC ResCap, HSBC North America Holdings Inc., JPMorgan Chase & Co, National City, Option One Mortgage, SunTrust Mortgage Inc., Washington Mutual Inc., and Wells Fargo & Co.

where will this take the market?

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