The WSJ is reporting that the Bush administration and major financial institutions are close to agreeing on a plan that would temporarily freeze interest rates on certain troubled subprime home loans. The plan is being negotiated between regulators and a coalition of mortgage-related companies including Citigroup Inc., Wells Fargo & Co., Washington Mutual Inc., and Countrywide. Details are still being worked out but the plan might freeze teaser rates for as long as seven years.
“People made their own judgment to buy homes on their own. When people make profits off of their properties, they don’t share them with others. Why should rest of us pay for their mistakes?”
One counterargument is that some borrowers didn’t know what they were getting into. “The banks and mortgage lenders that pulled out all the stops to persuade them to the contrary were in a far better position to know,” wrote former Robert Reich on his blog last month. “After all, they had lots of experience at this game.”
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