Banks may freeze ARMs as sub-prime aid measure

Treasury Secretary, Fed and leading banks and lenders of sub-prime loans are reportedly working on some plan to extend the teaser rates on mortgages which were scheduled to be reset at higher levels in the coming months. Till now no formal agreement has been reported but things are expected to be made public by next week.

Treasury Department spokeswoman Jennifer Zuccarelli said; “We’ve all agreed that there should be some sort of standardized approach to reaching more homeowners faster,...”

Earlier Federal Reserve Chairman Ben Bernanke has hinted of another cut in interest rate to prevent economy from recession.

Recently a magazine reported Treasury Secretary Henry Paulson’s remark "We'll have broad agreement on criteria that will make it easier to modify mortgages in the volumes we need,...".

This comes at a stage when the foreclosures in this year have already reached about double of last year. A increase in the period with teaser interest rates will provide relief to the home loan takers who may find difficult to pay the increased installment.

Probably in the meeting the concerned authorities may be figuring out a mechanism to selectively give the interest rate rebate to those with good repayment history.

The parties attending the meeting were Treasury Secretary, Fed regulators, officials from OTS (Office of Thrift Supervision), bank executives from Citigroup, JPMorgan Chase & Co., Wells Fargo & Co.’s amongst others.

According to an estimate, about 2 million house owners whose rates are going to be reset and may face foreclosures in 2008 if defaulted.