Time to Breath?

I was listening to Bob Brinker's Money Show as I drove home from an appointment on Saturday. High on his list of discussion topics was a plan that could save struggling homeowners from foreclosure by freezing interest rates before they reset sharply higher. More than 2 million subprime borrowers are facing higher mortgage costs and possible foreclosure in the next two years, and Treasury Secretary Henry Paulson is expected to announce details of the plan as soon as Wednesday.
Regulators and the mortgage industry are focused on restructuring 30-year subprime loans. These carry fixed interest rates for up to three years but then reset at higher rates, hitting borrowers with sharply higher costs.
During the five-year housing boom that ended in 2005, these adjustable-rate loans were widely available to subprime borrowers, whose spotty credit histories left them with limited loan options. While the loans offer initial low, "teaser" interest rates, they reset at rates much higher than those offered to prime borrowers with strong credit records.
Obviously, these loans are now held by "borderline borrowers", who are least likely to be able to handle the sharp increases and are most likely to lose their homes.
Right now, 15% of loans are in delinquency and that number is climbing. Brinker said that 100,000 loans are expected to reset every month for the next two years.
Treasury's plan would effectively extend the fixed-rate period for stressed borrowers, shielding them from a payment spike that could push them into foreclosure. Industry representatives and regulators are still thrashing out details of who would qualify for the interest rate amnesty and how long to extend the fixed-rate period of the loans, but lenders want to limit mortgage relief to borrowers who have a proven record of making payments under the initial rates.