Mortgage Rate Freeze Is Just the First Step

Implications: The mortgage rate freeze announced on December 6 will be harder to implement than one might think.  Many questions remain and the answers will have to be negotiated among the parties.  But even after it is implemented, it will not be enough and additional measures will be necessary.

Analysis: The Administration's plan to freeze interest rates for certain subprime borrowers will need to be fleshed out.  The details are lacking, and the answers will require hard negotiations among the parties.  Questions remain on such important matters as how to account for frozen loans, how to report the status of the loan, and  how to determine if the borrower is qualified.  However, even under a best case scenario, this plan will only affect a fraction of the loans that are in danger of defaulting, and additional action by the Administration, the Congress, the Federal agencies and the financial services industry will be necessary in 2008.