Treasury Secretatry Henry Paulson and the nation's big financial institutions are working out a voluntary plan to temporarily freeze interest rates on mortgages to subprime borrowers, according to several reports this morning.
The effort is aimed at slowing the growing wave of foreclosures while helping to stabilize the markets in investments tied to subprime mortgages that have been whipsawed as a result.
While the markets and the economy have already suffered from the implosion in subprime, the worse may be yet to come. That's because the boom in housing peaked in 2005. Many subprime mortgages then came with low introductory interest rates that reset after two or three years. That time is now approaching.
Many subprime borrowers are finding that they cannot keep up with the extra hundreds of dollars or more per month in payments on their mortgages once the rate shoots up to 10 or 11 percent.
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