President Bush's Foreclosure Announcement

Help could be on the way for people who have sub-prime mortgages and are in danger of losing their homes. President Bush has announced a plan that he says could help up to 1.2 million homeowners. But some worry the new program may not do enough.

What the plan does: The President says it would let homeowners with sub-prime loans refinance their loan, move them into an FHA Secure loan, or would freeze their current interest rate for five years. But homeowners must be able to afford the so-called "starter rate" on their mortgages.

Whose idea is it? The President says the program was developed by the "HOPE NOW Alliance", a group formed by government officials and people in the mortgage industry to help struggling homeowners find a way to refinance. The President says it's "an example of government bringing together members of the private sector to voluntarily address a national challenge."

Will it Work? That "voluntarily" part is a big question. A statement by a group called Global Insight, which recently studied foreclosures for the U.S. Conference of Mayors explains, the new program is a "step in the right direction." But the analysis points out, it's a "voluntary agreement among mortgage lenders and servicers." So to have success, Global Insight says there must be incentives and a "high rate of participation among the mortgage industry."

Why there's a problem: A new report by the Mortgage Bankers Association says foreclosure rates are the highest since they started taking a survey in 1986.

Mr. Bush says in the past few years, new types of mortgages enabled many Americans to own their homes. But many got in over their heads. He says the plan would not "bail out lenders, real estate speculators, or those who made the reckless decision to buy a home they knew they could never afford." But, he added, "There are some responsible homeowners who could avoid foreclosure with some assistance."

Why should it be fixed? As President Bush says, "The rise in foreclosures would have negative consequences for our economy."

As people face foreclosures they spend less on things like restaurants and gifts. Plus, Global Insight says the foreclosures are causing housing prices to go down. Among other consequences, they say in a recent report, foreclosures are likely to cost states billions of dollars in taxes.

Who Should I Call For Help? You can call HOPE NOW at 1-888-995-HOPE (Note: The president initially gave that as an 800 number during his speech, but it is an 888 number.)