Rate Freeze as a Slap in the Face to Some

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When Casey Johnson and his wife moved to San Diego County three years ago, they couldn’t find a home in their price range. So they did what they thought was the sensible thing, the Los Angeles Times reports.


Rather than over-leverage themselves with a risky mortgage, the couple rented an apartment in La Jolla and waited patiently for the housing market to drift back to earth, hoping they hadn’t missed their chance to become homeowners.


But now the government-brokered plan unveiled Thursday by President Bush to ease terms on some sub-prime mortgages feels like a “slap in the face,” Johnson said.


Many people who prudently sat out the housing bubble — or resisted the urge to cash out their home equity to help finance their standard of living — share that visceral reaction. In part, they resent on principle the rush to help a segment of society that may not have acted so responsibly. But they also fear that any effort to prevent foreclosures could keep home prices from falling to an affordable level.


“I try to do the right thing, which is to have a down payment and a job and to be fiscally responsible, and it basically looks like it’s not going to pan out if this sub-prime bailout goes through,” said Johnson, a 34-year-old biologist at the Salk Institute.


Proponents of the Bush-backed plan, under which interest rates would be frozen for five years for some adjustable-rate borrowers in danger of losing their homes, say the relief effort would help unsophisticated home buyers who were misled by mortgage lenders into taking on high-risk loans. Supporters also say the program is needed to keep the housing crisis from sending the country’s economy into a recession. A vast majority of the country’s politicians appear to be in favor of the plan, with some saying it doesn’t go far enough.


Read the full L.A. Times story

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