White House, banks, in rate-freeze deal?

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Good morning. The Wall Street Journal is reporting today that the White House and major lenders are about to announce a deal under which lenders will freeze the interest rates on sub-prime loans.

‘The Bush administration and major financial institutions are close to agreeing on a plan that would temporarily freeze interest rates on certain troubled sub-prime home loans, according to people familiar with the negotiations.’

More: ‘Details of the plan, which could be announced as early as next week, are still being worked out. In general, the government and the coalition have largely agreed to extend the lower introductory rate on home loans for certain borrowers who will have trouble making payments once their mortgages increase.’

The coalition of lenders in in talks with Treasury Secretary Henry Paulson (pictured) includes Countrywide Financial, Citigroup, Wells Fargo and Washington Mutual, the Journal reports. The arrangement sounds similar to the one announced recently by Gov. Schwarzenegger.

So many questions: Will it make a difference? (Remember, sub-prime loans that go into default often fail before the rate resets.) Is it fair? (Millions have ARMs that will reset -- where is their rate-freeze?) Is it good policy? Does it send a message to consumers that poor financial decisions will not lead to negative consequences? Are the lenders and servicers getting something in return? Regulatory concessions? Favors? Winks and nods?

These and more questions will be answered, I suspect, in the comment section. E-mail story tips to [email protected].
Photo Credit: Treasury.gov