Foreclosure intervention

Cries for federal intervention in the nation's foreclosure crisis will be answered this morning when President Bush announces a plan intended to keep some struggling families in their homes.

Few metropolitan areas have been spared from a perfect storm of falling home values and rising mortgage payments on subprime loans. Already, hundreds of thousands of homeowners who owed more than their properties were worth have willfully defaulted. Over the next two years, about 2 million more loans to high-risk borrowers will reset at higher interest rates and boost monthly payments as much as 30 percent, spurring fears that most of these homes will be foreclosed as well. Flooding an already saturated resale market with even more vacant, neglected residences would drop home values further.

According to The Associated Press, the president is expected to announce an agreement with lenders to freeze interest rates for some subprime mortgages for five years. Borrowers who are behind on their payments aren't expected to be eligible for the rate freeze.

That would be a great deal for subprime borrowers, many of whom bought their homes with no money down despite marginal to poor credit histories. Other subprime borrowers were investors who gambled that home prices would continue to boom long enough to allow them to "flip" the properties for a profit.

Stewing in the background are the tens of millions of responsible, traditional borrowers who saved diligently for a down payment and perhaps paid thousands of dollars in fees to "buy down" their interest rate. They avoided "teaser" rates because they knew they couldn't afford significantly higher payments down the road.

In all likelihood, Mr. Bush's plan, while brokered with the best of intentions, will only delay an end to the country's housing pains. Subprime borrowers will one day have to pay higher interest rates they can't afford -- they'll have to sell, refinance or default eventually. And allowing millions of people to remain in homes beyond their means delays the deflation of the nation's housing bubble, keeping prices higher and out of reach for those hoping to buy a first home.

The best solution? Having all levels of government keep their hands off this market correction.