CNN Talks to Homeowner Ignorant about His Loan: Is Rate Freeze 'Unfair'?
CNN â€śAmerican Morningâ€ť followed up news of President Bushâ€™s mortgage rate freeze by asking one homeowner â€“ whoâ€™s at least three months behind in his payments â€“ whether it was â€śfair.â€ť
Maryland resident Ed Anderson, who was interviewed earlier in the week by CNN, said he didnâ€™t know he had an adjustable rate mortgage until his payments went up. He wonâ€™t be affected by the rate freeze, because his already adjusted.
â€śYour rates have already reset, and as we mentioned this looks at rates that are going to reset going forward. Is that fair?â€ť anchor John Roberts asked Anderson on December 7.
â€śI honestly donâ€™t think thatâ€™s fair,â€ť Anderson replied.
â€ś[A] closer look at the presidentâ€™s plan suggests it covers just a fraction of homeowners,â€ť said Roberts.
Roberts did at least ask one tough question left out of many reports. He challenged Anderson to explain why he took out an adjustable rate mortgage that â€śhe knewâ€ť was going to reset.
â€śWell, honestly I did not know that it was going to reset because I was only told that it was actually an interest-only loan. I just honestly found this out in mid-September,â€ť said Anderson.
But when CNNâ€™s â€śAmerican Morningâ€ť interviewed Anderson the first time, on December 3, loan papers implied to be Andersonâ€™s were shown onscreen. The words â€śARMâ€ť and â€śAdjustable Rate Secured Loanâ€ť appeared in bold print.
That report by Chris Lawrence stated that Andersonâ€™s initial mortgage payment was $2,200 a month. Anderson told CNN that he now owes an â€śunrealâ€ť $3,400 a month.
According to Lawrence, â€śAnderson told me even working overtime he needs about a three-week salary to pay his monthly mortgage.â€ť
And that would mean Anderson was already in too deep before his rate adjusted. Financial expert Dave Ramsey told CBS News that â€ś[Mortgage] payments shouldnâ€™t be more than 25 percent of your income.â€ť
Roberts didnâ€™t mention other criticism of the rate freeze in his December 7 interview with Anderson, but Seth Jayson of The Motley Fool, John Berlau of the Competitive Enterprise Institute and many others have criticized a mortgage bailout.
â€śWhen the government takes on the risk that lenders should hold, it lowers the cost of lending,â€ť Jayson wrote. â€śAnd that, as recent history has shown, makes people do all sorts of silly things â€“ such as, say, sign up for terrible teaser-rate ARMs,â€ť he explained.
Jayson also warned about the unintended consequences of the Bush plan, which he said would result in â€ścrunchierâ€ť credit and punish future borrowers. The Washington Post wrote on December 6 that the plan would cost taxpayers at least $200 million, money that will go to pay for counseling hotlines.