The Bush administration announced a plan that freezes interest rates for some credit-challenged homeowners who purchased their homes with subprime loans. President Bush called for Federal Housing Administration reforms to lower borrowing requirements for FHA conforming loans, and a five-year freeze on some subprime mortgage loans. Eligible borrowers are those holding adjustable rate mortgages that are about to reset to higher rates and who are current in their payments.

The move will potentially minimize losses to banks, securities investors, and the economy, by keeping more homeowners out of defaults and bankruptcies.

But not everyone is cheering. A recent poll by the National Taxpayers Union found that almost half of U.S. adults think a federal bailout is the wrong way to go. Tax dollars shouldn't be used because many homebuyers who are now in trouble deliberately bought more house than they could afford. Further, many blame Wall Street, which sold mortgage-backed securities to investors while underplaying the risks of subprime loans.

Standard and Poor's argues that a freeze will "have a negative impact on the ratings of certain U.S. first-lien subprime residential mortgage-backed securities." The risk is that smaller payments won't make enough money available to pay investors. If you can't get investors to buy the securities from banks, banks can't get resupplied with money to loan out to fresh borrowers. Subprime mortgage lending, about 10 percent of the market, comes to a halt.

Treasury Secretary Henry Paulson insists the interest freeze is only available to homeowners occupying their homes, not for real estate speculators. But any freeze on mortgage interest rates amounts to a subsidy that does nothing for the homebuyers who did all the right things, including buying within their means.

While the debate goes on, other help is on the way. This week, mortgage interest rates fell to two-year lows. Some borrowers may be able to refinance their loans into safer fixed-rate without waiting for a federal handout.

That begs the question -- how many homeowners can be helped by simply allowing the markets to work?

Published: December 7, 2007

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.