Chipping away at the mortgage crisis

What happened

President Bush on Thursday announced a plan to freeze interest rates on subprime mortgages set to rise in coming months. With foreclosures rising and millions of Americans at risk of losing their homes, Bush said the deal with lenders was a “sensible response to a serious challenge.” (Kansas City Star)

What the commentators said

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This plan makes sense, said USA Today in an editorial. It will help more than 1 million people with iffy credit avoid losing their homes, because their monthly payments won’t rise to levels they can’t afford. But it’s “unfair” because it only helps a select few, and it’s probably too little, too late, anyway.

It’s not a cure-all, said The Boston Globe in an editorial (free registration), but it’s “at least a start.” It won’t “make the broader financial crisis go away,” but freezing rates will help some of those with “risky” adjustable-rate mortgages avoid getting caught up in the record wave of foreclosures without placing an “unreasonable burden” on investors.

Bush’s mortgage plan doesn’ have to erase the debt crisis to boost the stock market, said Susan Harrigan in Newsday. “People who manage investors' money said that although Washington's actions are a drop in the bucket compared to the magnitude of the problems in the credit markets, they may help bring about solutions.”

“Industry and government can still do more,” said the Los Angeles Times in an editorial (free registration). Lenders should extend a hand to borrowers whose rates have already jumped—especially those who were lured into unwise deals with “aggressive (and sometimes fraudulent) sales techniques.” And regulators should strengthen the rules so these “abuses” become “less common in the future.”