Opponents to the Teaser Rate Freeze

Some of the biggest opponents to the teaser rate freeze are home owners and potential home owners. The excerpts below gives an abridged version of the article. The article has a number of anecdotes that are interesting perspectives on the entire teaser rate freeze idea. Text in bold is my emphasis. From the WSJ:

The Bush administration's plan to give subprime borrowers a break on their mortgages is already catching flak from an unexpected source: other homeowners.

Treasury Secretary Henry Paulson, at a housing conference yesterday, said he is "aggressively pursuing" an agreement with lenders and investor groups to freeze rates on subprime adjustable-rate mortgages at their original levels. The proposal, aimed at helping homeowners who would fall behind in their payments at higher rates, is designed to prevent a surge in foreclosures next year. About 1.5 million subprime adjustable-rate mortgages are scheduled to reset to higher rates in 2008.

But as outlines of the plan become known, some homeowners are complaining that the effort isn't fair to borrowers who didn't overextend themselves. Others argue that the government shouldn't be involved in perpetuating a housing bubble that needs to deflate. A key question: How far should you go to help borrowers who can't pay their bills?

"People have to be responsible for their own actions," says Harry Lancz, a small-business owner in Traverse City, Mich. He holds a pair of fixed-rate mortgages, one for his primary residence, which has been for sale for six months, and one for a second home in Louisiana. "What are you going to do when their credit cards get due and they can't pay? Are you going to bail them out on that, too?"

Like many homeowners, Mr. Lancz, 57, is skeptical that the plan will actually lessen the impact of the housing crisis. "Unless you give them the money, this is just postponing the inevitable," he says. "The more the government steps in, the more things get into a deeper quagmire."

The Paulson plan wouldn't help subprime mortgage holders who can afford the higher payments. In addition, it won't help those who can't manage to make their payments even at current rates. Because of that, some consumer advocates say the plan doesn't go far enough in helping troubled borrowers.

"This only deals with one of the easiest of the categories" of borrowers, says Mike Shea, executive director of Acorn Housing Corp., a national housing-counseling organization. "It will do nothing to help those people who are currently delinquent and facing foreclosure." Mr. Shea praises Mr. Paulson for trying, but points out, for example, that some mortgage-loan servicers already are freezing rates for five to seven years, so a grace period shorter than that in the government's proposal could be a step backward.

Proponents of the plan say it would prevent the housing sector from derailing the rest of the U.S. economy. In addition, they say that "predatory" lenders -- not just careless borrowers -- are responsible for the mess, and that homeowners shouldn't necessarily lose their homes as a result.

But some would-be homeowners who have been waiting for house prices to fall say the government proposal would prop up prices, and thus keep them out of the market. . . . .