Which subprime fix will hit home?
TEXT OF STORY
Bob Moon: Seems everybody’s got a plan to fix the subprime mess — the White House, the Federal Reserve and Congress, to name a few. But will any of them succeed? Marketplace’s Jeff Tyler gives the proposals a once-over.
Jeff Tyler: The White House plans to use the Federal Housing Authority to let some homeowners refinance into insured mortgages.
Chris Lowe, chief economist with FTN Financial, calls it the most direct approach:
Chris Lowe: It means they will get a lower interest rate. Because those who finance mortgages are willing to do so at a lower rate with that government guarantee.
But, he says, that plan only applies to about 80,000 homeowners.
Another plan would allow mortgage giants Fannie Mae and Freddie Mac to buy so-called “jumbo loans” worth upwards of $417,000.
Lowe says that Fannie Mae and Freddie Mac could have a big impact by entering the market.
Lowe: They can, and often have in the past, very quickly calmed down mortgage markets that are in turmoil.
Even with the fixes, Lowe expects subprime foreclosures to stay in the double digits for another year.
I’m Jeff Tyler for Marketplace.
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