What, then, does the Bush plan do? Here are some answers:
Q: How many borrowers with sub-prime loans — those given to homeowners with the weakest credit histories — will the plan reach?
A: The Federal Housing Administration expects to have refinanced 100,000 sub-prime homeowners with adjustable-rate loans in the current fiscal year, which ends Sept. 30. It expects to refinance another 140,000 next year through its FHASecure, a new name for the refinancing it's already doing.
Q: Does that cover most of the problem loans?
A: Not even close. The administration admits that it'll be able to reach, in a best-case scenario, 480,000 qualified sub-prime borrowers by the end of 2009. But it thinks that 600,000 or 700,000 will qualify for help.
Housing advocates expect 2.2 million or more foreclosures tied to the sub-prime meltdown. The administration thinks that two-thirds of the sub-prime loans that were issued in 2005 and 2006 — when lending standards weakened significantly — were exotic adjustable-rate loans with low teaser rates that will reset to much higher rates late this year and next year. Housing groups say 81 percent were. Whichever number is correct, the worst is still ahead on foreclosures............................