The U.S Treasury Department is going to intoduce a plan that could save all homeowners who are struggling from the foreclosure syndrome. The Department will apply this plan using the collaboration of home loan business leaders. However the analysts have one thing else to say. They believe that this program can’t support the banks to survive through the discomfort of residence loan.
Sources said that the strategy is nearly ready and just needs some final brush up. If everything goes correct then the details will be announced on Wednesday.
The Philadelphia KBW Bank Index, BKX hiked 3.1 percent on Friday. This rise proves that the Government is aware of the issues from the home loan and housing marketplace. Chairman of Soifer Consulting, Mr. Ray Soifer also confirmed the previous statement. In this industry the foreclosures are increasing as well as the household costs are falling.
As far as the sub prime loans are concerned they’re also facing a issue. In this loan, the teaser rates initially stay low. But it goes up after two or three years. The new program will freeze the interest rate with the borrower prior to the rate becomes higher.
You will discover some analysts who believe that if the terms of loan are renegotiated then it will just postpone the writing off procedure for such loans. However the loans require to be written down mainly because the borrower will not be capable to repay the expected amount.
The Chief strategist of Sandler O’Neil & Partners in New York Mr. Robert Albertson said that, if a bank wanted a higher rate in a longer term, then it would not get it a teaser rate.
The analysts said that the treasury hoped that bank could prevent the writing down of excessive home loan related assets in the time of acceleration on the economic growth of other sectors. This will allow the banks to produce profits in a higher level.
Financial Services Analyst of PNC Wealth Management in Philadelphia Mr. Mark Batty said that if the income from the borrower increases, then the borrowers can be in a position where they can fight using the up growing interest rates.
The shares of Wells Fargo & Co rose nearly 7% to $32.43. Countrywide Financial Corp shares rose 16.3% to $10.82. These two banks are in a talking term using the treasury.
Some investors consider the above scenario too much optimistic.
Portfolio Manager of Hedge Fund Trident Investment Management Mr. Nandu Narayanan said that postponing the inevitable situation can only drag the foreclosure on for a longer time.
Some other people like Mike Holland, and Albertson believe that this new plan of treasury department though promising, can have some bad effects as well. They believe that there will be a whole lot of inappropriate proposals prior to finally settling down using the correct one.
But most on the analysts believe that this proposal can be a big aid towards handling of the crisis at hand. Mr. Batty thinks that giving the proposal a chance is better than doing nothing.