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Paulson: No ‘Silver Bullet’ in Bid to Ease Mortgage Crisis

As home foreclosures reached a record high Thursday, President Bush announced a deal with mortgage lenders to freeze interest rates on some subprime mortgages due to move sharply higher soon. Treasury Secretary Henry Paulson discusses the details of the proposal.

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    The mortgage story. Judy Woodruff begins with an interview with Treasury Secretary Henry Paulson.


    Secretary Paulson, thank you very much for joining us.

  • HENRY PAULSON, U.S. Treasury Secretary:

    Judy, it's good to be here.


    Tell us who exactly will be helped by this plan, and how will they be helped?


    OK, Judy. Let me explain what's been done and what's been announced today. We still have a lot more work to do, and we've done a lot of work between now and August.

    But what's happened is that the mortgage industry has come together to devise a plan to help subprime mortgage borrowers whose rate is going to be facing a reset that they won't be able to afford.

    And as we've looked at the universe of buyers, Judy, there are some mortgage-holders who are obviously not going to need any help, and they're not going to be affected by this. And there's going to be another group that we're not going to be able to help, because they won't have the financial capability to afford a reasonable mortgage.

    And so we're focusing on the middle group. And what is being done is the industry — and here I'm talking about not just the servicers who collect the payments, but talking about the investors who hold the ultimate securities — have agreed to some simple criteria, some standard criteria, which is going to allow them to process modifications much more quickly.

    And there will be a group of homeowners that meet the criteria and are going to have trouble meeting the higher rates, and they will have their rates frozen for five years.


    So just to clarify here, of all the people who are facing problems here, how many? Do you have a number of how many will be helped?


    Well, we are looking at a total of about 1.8 million adjustable-rate subprime mortgages which will reset in 2008 and 2009. And the industry estimates that there will be about 1.2 million of these who will qualify for a refinancing or a mortgage modification.