On December 6, President Bush revealed a plan to help some borrowers with ARMs avoid a rate hike for 5 years. The plan is designed to help homeowners build equity and have time to improve their credit so that they can refinance to a mortgage loan with better terms.
The purpose is to prevent a foreclosure fallout that would affect entire neighborhoods and further decimate housing markets in several key cities. They key compromise though is that homeowners must not be delinquent in their payments.
The reason that this plan will not benefit everyone is that it is not intended to bail out irresponsible mortgage lenders and other speculators. It is only intended to provide relief to working families that would likely default if their monthly payment increased more than 10 percent.
An estimated 35 percent of ARM holders are unaware that their mortgage payments will increase. For many of these families, their payments will increase more than 50 percent. Some could even see their payments double.
Some argue that it is not the role of government to intervene when people have signed irresponsible agreements. However, sometimes government regulation is necessary to protect people from predatory terms.
Affected homeowners should seek the assistance of a HUD approved housing counseling agency if the feel they may be eligible for this assistance. Even if a family is not eligible, they may still be eligible for other options that can help them prevent a future foreclosure.
