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1.8 Million Sub-Prime Mortgages Poised To Surge

The news handed down by U.S. Treasury Secretary Henry Paulson was glum today: as many as 1.8 million sub-prime mortgages are poised to reset over the next two years. Currently pegged at historically low rates, these mortgages will suddenly surge as the adjustable rate period kicks in. The result will be that some homeowners will pay hundreds of dollars per month more for their loans.

Worries that the pending higher rates could cause hundreds of thousands of homeowners to default on their loans, thereby putting added pressure on the housing market, Paulson mentioned this particular concern as the reason why the federal government arranged a plan with the mortgage industry to freeze rates for a full five years to give the market time to recover.

Although the U.S. economy is not yet in a recession, some people have feared that the sub-prime home financing market would push the economy downward if intervention did not take place. Paulson added that a housing correction is inevitable, even necessary given the five-year period where prices and sales climbed to record levels.

Some opponents to the Bush plan believe that the president is responding to election year pressures although the president himself is not running for office.

In a related story, more than 86,000 mortgage industry jobs disappeared in 2007 due to the turn down in the lending market according to news reports.

Tags: Bush Administration, Henry Paulson, home lending, mortgage financing, mortgage news, rate freeze, sub-prime mortgages, U.S. Treasury