President Bush announced Thursday a plan to freeze interest rates for five years for some homeowners with adjustable rate mortgages they can't afford, the same day a new report showed foreclosure rates had reached a record high.
Some people say Bush's plan is not enough, while others say it goes too far.
The Treasury Department negotiated the deal with the mortgage industry. To get the mortgage rate freeze, you must meet these guidelines:
You have to be up to date on your mortgage payments.
The mortgage must be an adjustable rate subprime loan — the kind usually given to people with weaker credit.
The first adjustment can't come until after Jan. 1, 2008.
You must be unable to afford your new monthly payments.
Foreclosures Bad for a Neighborhood
Grandmother Nettie McGee is in danger of losing the Chicago home she loves, so earlier this week, she went to Washington to share her story.
"Please help people like me, please, who wanted their entire lives to own their homes," McGee said at a congressional hearing.
McGee will not be benefiting from the president's new plan, however. The Bush bailout only applies to people whose mortgages adjust after Jan. 1. McGee's mortgage payments went up six days ago, from $707 a month to $912.
"I don't have it. I'm on a fixed income, Social Security," she said.
McGee originally had an affordable fixed-rate mortgage, but was forced to refinance when she found out she owed thousands in back taxes because of a city mistake.
"Well, I feel like I was treated wrong," McGee said. "They had me signing these papers."
The Bush administration says its plan will help 1.2 million people save their homes. But critics say it's more likely to help only a few hundred thousand.
"Homeowners are drowning and they're 20 feet from the boat and the administration threw out a 10-foot rope," said Sen. Richard Durbin, D-Ill.
New Jersey resident Marlo Patsko dislikes the deal for a different reason. She believes it rewards irresponsibility. Patsko says she and her husband were careful to buy a house within their means.
"People who work hard for a living and watch their budgets and spend less than what they make are penalized, because nobody is knocking on my door offering me a rate cut," Patsko said.
Some analysts, though, say people shouldn't resent neighbors who benefit.
"Foreclosures are bad not just for the people who lose their homes, but also for everybody who lives around that home, because foreclosures tend to lower the values of houses in that area," said Doug Elmendorf, a Brookings Institute analyst.
That's a message McGee would like her lender to hear. "I want to be able to save my home," she said.