CNN Talks to Homeowner Ignorant about His Loan: Is Rate Freeze 'Unfair'?
CNN âAmerican Morningâ followed up news of President Bushâs mortgage rate freeze by asking one homeowner â whoâs at least three months behind in his payments â whether it was âfair.â
Maryland resident Ed Anderson, who was interviewed earlier in the week by CNN, said he didnât know he had an adjustable rate mortgage until his payments went up. He wonât be affected by the rate freeze, because his already adjusted.
âYour rates have already reset, and as we mentioned this looks at rates that are going to reset going forward. Is that fair?â anchor John Roberts asked Anderson on December 7.
âI honestly donât think thatâs fair,â Anderson replied.
â[A] closer look at the presidentâs plan suggests it covers just a fraction of homeowners,â 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 âhe knewâ was going to reset.
âWell, 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 said Anderson.
But when CNNâs âAmerican Morningâ interviewed Anderson the first time, on December 3, loan papers implied to be Andersonâs were shown onscreen. The words âARMâ and âAdjustable Rate Secured Loanâ appeared in bold print.
That report by Chris Lawrence stated that Andersonâs initial mortgage payment was $2,200 a month. Anderson told CNN that he now owes an âunrealâ $3,400 a month.
According to Lawrence, âAnderson told me even working overtime he needs about a three-week salary to pay his monthly mortgage.â
And that would mean Anderson was already in too deep before his rate adjusted. Financial expert Dave Ramsey told CBS News that â[Mortgage] payments shouldnât be more than 25 percent of your income.â
Roberts didnât 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.
âWhen the government takes on the risk that lenders should hold, it lowers the cost of lending,â Jayson wrote. âAnd 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 he explained.
Jayson also warned about the unintended consequences of the Bush plan, which he said would result in âcrunchierâ 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.