The US Treasury Department caught a lot of peoples’ attention yesterday when it announced it was working on a plan that would “encourage” banks to lend 30 year fixed rate mortgages as low as 4.50%. I’d like to personally thank Hank Paulson for the free advertising. Since that announcement many past clients have inquired with me about reviewing their mortgages. However, there appear to be a few strings attached. Here are some notes from the Wall Street Journal article on the subject:
*The plan, which is in the development stage, would temporarily use the clout of mortgage giants Fannie Mae and Freddie Mac to encourage banks to lend at rates as low as 4.5%.
*The plan remains in discussion and may not be made final before the Bush administration’s term ends in January.
*The lower interest rates would be available only to borrowers who are buying a home, not those refinancing a mortgage.
*Borrowers would have to qualify for a mortgage guaranteed by Fannie, Freddie or the Federal Housing Administration. Those guarantees apply to loans where borrowers can document their income and afford their monthly payments, steering the government away from backing loans considered risky.