Countrywide, G.M.A.C., Litton and HomeEq have agreed to let many potentially distressed borrowers in California keep the initial low rates of their ARM home loans, says the New York Times. California is the epicenter of the subprime meltdown, with foreclosure rates that are always near the top of the list (along with Ohio, Michigan, Nevada and Florida).
Here are the details:
A Schwarzenegger aide, Sabrina Lockhart, said the governor’s office negotiated an agreement with the Countrywide Financial Corporation, G.M.A.C., Litton Loan Servicing and the HomeEq Servicing Corporation that would allow the lenders’ mortgage borrowers in California to continue paying loans at initial rates if they live in their homes and make payments on time but are unlikely to afford higher payments when their mortgage interest rates are reset.
Governor Schwarzenegger’s office estimates 500,000 Californians hold subprime mortgages whose rates will reset at higher levels over the next two years.
Ms. Lockhart said that the governor wanted the agreement, based on a proposal by the Federal Deposit Insurance Corporation chairwoman, Sheila C. Bair, to stand for five years, but said that how long it stays in effect at each company would depend on individual circumstances.
What do you think of this? Should troubled ARM borrowers get to keep their teaser rates? Will this stop the foreclosure tsunami? Is it too late?