“It may put off some of these foreclosures for a year or two, but they’re going to eventually hit,” he said. “All it does is cushion and delay the inevitable.”
The Bush administration’s voluntary plan, conceived in partnership with the mortgage industry, would freeze interest rates for five years for homeowners who lived in their homes, had not missed any payments and took out their loans between 2005 and July 30 of this year. Other homeowners could refinance existing loans or move into new loans under the Federal Housing Administration.
The proposal came after a disastrous year in the mortgage industry in which record numbers of homes went into foreclosure, mortgage companies laid off scores of workers and housing prices dropped as unsold homes flooded the market. The five-year freeze on interest rates could help to keep prices steady by preventing more homes from going into foreclosure, according to Galel Fajardo, president of the Coast Mortgage Group in Costa Mesa.
“I’d rather have those homes sit there for five years and let the market rebound,” Fajardo said, while agreeing with Fawcett that some foreclosures may be impossible to avoid.
Valerie Torelli, the owner of Torelli Realty in Costa Mesa, also had mixed feelings about the plan. She approved of the effort to keep foreclosures down, but said freezing the interest rates would be unfair to investors — both individuals and companies — who had money riding on the loans.
“The part that is troublesome to me is the interference of government on free trade,” Torelli said. “It’s a totally voluntary system, which is good, but it interferes with capitalism and it interferes with the investors who bought those loans.”
MICHAEL MILLER may be reached at (714) 966-4617 or at michael.miller@latimes.com.
