The big news story of the week was undoubtedly the Bush administration's mortgage rate freeze negotiated with the country's largest lenders. The plan, dubbed Hope Now, is an alliance of financial-industry stalwarts, (including Citigroup, JPMorgan Chase, and Wells Fargo) that could provide relief to up to 1.2 million borrowers.Hope Now offers assistance in one of three ways: freezing rates (up to five years), refinancing into a new private mortgage, or obtaining a loan backed by the Federal Housing Administration. Borrowers who have rates scheduled to adjust between January 2008 and July 2010 and who are current on their payments and have been no more than 60 days late in the past year qualify for the deal.The timing of the announcement was fortuitous, to be sure; the Mortgage Bankers Association reported that homeowners fell behind on their mortgage payments at the highest rate in more than two decades last quarter.Fortunately, the economy continues to mitigate some of the subprime damage and defy conventional wisdom that it's headed toward a recession. On the contrary, employers hired more workers than forecast in November, with payrolls rising by 94,000 and hourly wages increasing 0.5% to $17.63.Just as important, workers – new and old – were found to be more efficient: Worker productivity accelerated more than forecast in the third quarter, rising at an annual rate of 6.3%, while labor costs dropped 2%, the most in four years. Greater efficiency eases pressure for companies to raise prices to counter rising energy costs, further diminishing the threat of inflation.Last week the 30-year fixed-rate loan averaged 5.96%, while the 15-year fixed rate loan averaged 5.65%, according to Freddie Mac's weekly survey. These are levels unseen in over two years.
Eric P. Egeland