NEW YORK The Bush Administration is close to agreeing on a pact with major financial institutions that would temporarily freeze interest rates on certain subprime loans, the Wall Street Journal reported Friday, citing sources familiar with the negotiations.
The plans' details, which could be announced as soon as next week, are still being ironed out, the Journal said.
According to the Journal, the accord is being negotiated between regulators including the U.S. Treasury Department and a group of mortgage-related firms, including Citigroup Inc, Wells Fargo & Co, Washington Mutual Inc and Countrywide Financial Corp.
Sources with knowledge of the negotiations told the Journal that individual members have agreed to abide by any agreement reached by the coalition, which is called the Hope Now Alliance.
The newspaper said the coalition and the government have largely agreed to extend the lower introductory rate on mortgages for certain borrowers who will have trouble making payments when their mortgages increase.
To be determined, however, are exactly which borrowers would qualify for the freeze and for how long it would last, the Journal said, adding one scenario envisions a freeze lasting as long as seven years.
In California, four top mortgage lenders have agreed to a deal brokered by Gov. Arnold Schwarzenegger to allow borrowers facing unaffordable resets to keep their lower initial rates five more years if they live in their homes and continue to make payments on time.
About $890 billion of subprime U.S. mortgages will have their rates reset next year, peaking in March, according to a report by the Organization for Economic Co-operation and Development.
(Reporting by Justin Grant; Editing by Ben Tan)