Citing a risk to the US economy, President George W Bush on Thursday unveiled a plan to help up to 1.2 million struggling homeowners pay their loans and avoid losing their residences, according to DPA. The voluntary agreement by lenders and investors, brokered by the Bush administration to fight the subprime mortgage crisis, includes a possibility for some homeowners to freeze the interest rate on their adjustable rate loans for five years. Bush said the threat of losing their homes "is a terrible burden for hard-working families and a source of concern for communities and neighborhoods across our country." "The rise of foreclosures would have negative consequences for our economy," he said at the White House. "Lenders and investors would face enormous losses, so they have an interest in supporting mortgage counseling and working with homeowners to prevent foreclosure." He stressed that the plan envisages no government funding and excludes any bailout for lenders stuck with bad loans, real-estate speculators or people who bought homes they could not afford. Up to 1.2 million homeowners may be eligible for aid under the plan, dubbed the Hope Now Alliance. Bush read out a national toll- free phone number that people can call to see whether they qualify. Subprime loans, promoted by financial companies as a way for people with weak credit to buy homes, start out with low interest rates that rise after the first few years - the reason many homeowners are now struggling. Rising mortgage defaults this year have rocked financial markets, caused billion of dollars in losses on securities backed by the home loans and pushed the crisis high onto the politcal agenda. One impetus for Bush's initiative, launched in August, was the threat to the global financial system from the subprime crisis - a point he acknowledged Thursday. "Some lenders made loans that borrowers did not understand, especially in the subprime sector. Some borrowers took out loans they knew they could not afford," he said. "And to compound the problem, many mortgages are packaged into securities and sold to investors around the world," he said.
