December 6, 2007 - Today, President Bush announced a program to help troubled sub-prime borrowers save their homes. Lenders in the program will voluntarily agree to freeze interest rates for certain borrowers who won't be able to afford their mortgage payments once their interest rates are increased. While the program may help many, an even larger number of people with sub-prime loans will reap no benefit from it.

Bush's announcement has been expected for several days. The plan was actually orchestrated by Treasury Secretary Henry Paulson.

In the announcement, the President said that as many as 1.2 million borrowers could be eligible to participate. But an independent analysis of the plan by Barclays indicates that the plan will only help 240,000 borrowers; leaving many out in the cold. Here is a breakdown of some of the key criteria for borrowers to be eligible:

• Only homeowners who took out sub-prime adjustable rate loans between January 1, 2005 and July 31, 2007 are eligible for relief. Their loans must be set to adjust upwards sometime between now and July 31, 2010.
• Only loans for homes used as a primary residence can qualify. Investment and speculative property is excluded.
• The borrower's income must be high enough to be able to afford their current monthly payment but not so high that they could afford to make payments after an increase in interest rates.
• Anyone who has already missed a mortgage payment would be disqualified from participation.
• If the current value of the home is less than the amount owed on the mortgage, the mortgage would be disqualified from participating.

Although the President expressed hope that most lenders and investors would participate, the program is strictly voluntary. This may mean that not all homeowners that meet the criteria listed above will be able be eligible. If their lender is not a participant in the program, there is nothing that the government can do to force them into compliance.

Based on the information on the program's website, the following lenders have agreed to participate:

• Bank of America
• Citigroup, Inc.
• Countrywide Financial Corporation
• GMAC ResCap
• HSBC North America Holdings, Inc.
• JP Morgan Chase & Co
• National City
• Option One Mortgage
• SunTrust Mortgage, Inc.
• Washington Mutual, Inc.
• Wells Fargo & Company

Just because a lender doesn't appear on this list doesn't mean that they will not participate in the program. For the most up to date news on participants, the White House is encouraging troubled borrowers to call 888-995-HOPE.

by Jim Malmberg

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