Rus News Journal

the Plan nonideal, but reasonable

US president George Bush has published the plan providing freezing of interest rates by problem kinds of mortgage loans. Participants of the market doubt that the offered measures will allow to stop distribution of mortgage crisis.
the plan of freezing of rates declared by US president George Bush on vysokoriskovoj to a mortgage for five years should to help to cope on a plan of regulating bodies of the USA with growth of number of default of borrowers before banks. The increase in interest rates on subprime - to credits became the main reason of growth of number of defaults in bank system. It has provoked the global financial crisis, brought to banks and financial corporations multi-billion losses. Write-offs of investment banks and the financial companies have already exceeded $57 billion By estimations of some experts, the general losses from crisis can make to $2 bln. Since first days the federal government has underestimated depth and negative influence of this crisis - the independent analyst and the former representative of the ministry of housing construction and city development of the USA Howard Glaser considers.

Increase of interest rates can mention next year, by estimations FRS the USA, about 1,8 million mortgage loans with the floating rate, and even more 500 thousand families can lose habitation. The majority of such credits in first two years has the fixed percent which changes subsequently depending on market conditions. The rate under the typical credit, not exceeding at the first stage 7 - 8 %, could jump up to 9,5 - 11 % annual. For the companies which are engaged in a mortgage, increase of rates could turn back new write-offs from - for the increased defaults.

Struggle against crisis by means of freezing of rates within several months was discussed by a Treasury Department of the US and the leading companies working in mortgage business, - Citigroup, Wells Fargo and Co., Washington Mutual and Countrywide Financial. According to the plan presented by the president Bush, the financial organisations will assist about 1,2 million families to which mortgage loans during the period since January 2005 till July, 2007 have been given out. To have the right to help reception (it will be given in the form of freezing of the interest rate or credit refinancing), the creditor should correspond to a number of conditions.

according to mister Bush, the plan nonideal, but reasonable . With it the experts ruining the plan antimarket and frivolous obviously do not agree. According to analysts Barclays Capital Research which has let out yesterday the analysis of the plan, it can reduce cumulative losses from mortgage crisis on 0,6 - 1 % that not too will help, when losses can make 13 - 15 % . According to one more expert of company Lord Abbett and Co. Milton Ezrati, the plan can undermine a securities market, provided with mortgages. Investors, in its opinion, can tell: If to you block a cash stream today it can be made and tomorrow .

George Bush`s Political opponents - younger also have scarified the plan that it will help only to minority of citizens. Creditors with a good credit rating cannot use the offered measures that, according to the head of financial committee of the House of Representatives of the congress of the USA Barni Frank, actually means punishment of diligent payers.

However, on Uoll - strit Bush`s plan has been met positively that have testified results of the auctions at a stock exchange of New York. Actions of the largest mortgage creditor of USA Countrywide Financial have risen in price for 16,12 %, to $12,17. Quotations of the building companies have seriously grown: actions Lennar have risen in price for 15,26 %, to $18,19, and Toll Brothers - on 13,03 %, to $23,49.