Paulson Hints at Expansion of Rate Freeze Agenda

An administration official stated on Tuesday that the White House was involved in discussions with mortgage industry officials about expanding the current interest rate freeze program announced shortly before Christmas to other at risk borrowers.

Secretary of the Treasury Henry Paulson, in an interview on CNBC said that the administration was discussing expanding the HOPE NOW alliance to include borrowers with adjustable rate loans who do not fall into the subprime category.

"One thing we will consider," Paulson said, is "maybe expanding this beyond subprime borrowers to other borrowers."

The program, as originally announced, would freeze interest rate increases on sub-prime mortgages, particularly those with initial "teaser" rates for five years as long as the borrower was current on mortgage payments and met other criteria established by the owner of the mortgage. It was clear that this freeze would apply to only a limited number of those who were due to be affected by interest rate "resets."

Current discussions involve including borrowers who have adjustable rate mortgages at prime rates. Subprime rates are usually given to borrowers with flawed credit histories.

Paulson also called on Congress to complete passage of so-called FHA reform legislation which, he said, would help 250,000 at-risk homeowners with subprime ARMs. This legislation has passed both the House and the Senate but is awaiting conference committee meetings which will, hopefully, iron out inconsistencies between the two versions of the bill before sending a final bill to the President for his signature.