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Originally Posted by river_ratiii
I don't see that in Paulson's comments. It seems the focus is to ensure more people are able to keep their homes by pressuring financial institutions to roll-back rates. The only Federal money seems to be going to the FHA to provide MORE lower income low rate mortgages. This is all Federal...how are the lenders and investors benefiting?
The way I see it, the financial institutions are going to "eat" the additional income they were expecting from higher interest rates, and the tax-payers are going to fund government plans to aid borrowers who made bad financial decisions.
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It seems to me that with the exclusions of groups of borrowers I mentioned above (and others like those whose homes are worth less than what they owe) that the financial institutions will benefit most.
There is also the question of the investors:
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The big sticking point in the lengthy negotiations was getting investors who have purchased the mortgages after they have been bundled into mortgage-backed securities to agree to accept lower interest payments. Critics have said even with a deal, there are likely to be lawsuits.
"The $64,000 question remains: will investors who might balk at going along with this be able to maintain legal roadblocks and prevent the plan from going into effect?" said Sen. Charles Schumer, D-N.Y.
But officials representing major players in the mortgage industry said they believed the plan would withstand any legal challenges and would help at-risk homeowners avoid defaulting on their mortgages.
http://money.cnn.com/2007/12/05/real...ion=2007120610
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We should know more details about the plan later today from the Treasury Dept and White House.