×

The Teaser Freezer Deal

tomorrows_playbook_2.jpg

Treasury Secretary Henry Paulson says that an agreement is near on a proposal to help thousands of at-risk homeowners avoid foreclosures by temporarily freezing their mortgage rates.

An estimated 2 million subprime mortgages — loans offered to borrowers with spotty credit histories — are scheduled to reset to much higher levels by the end of 2008. Those resets will push the payment on a typical mortgage up by $350 per month, taking it from $1,200 currently to $1,550.

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

Subprime Categories

Group 1: Can afford higher mortgage reset
Group 2: Can't even afford teaser rate
Group 3: Can refinance
Group 4: Can afford teaser rate, but not reset

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

The last item (in bold) is the most questionable, says Karen Finerman. And how do you figure out who falls into which category. We need the market to just flush out the bad loans, she adds. What we don’t need are politicians interfering with the process.

Forget the politicians, says CNBC's Jane Wells, the big question is can Paulson get the bondholders on board? These securitized mortgages are governed by contracts between the two and if the lenders break the contracts, what happens??? There is legislation pending to protect lenders from possible lawsuits, Wells adds, but it's unlikely to pass soon.

> Read more "Is Freezing Rates The Right Fix for Subprime Mess?"

Symbol
Price
 
Change
%Change
NASDAQ
---
S&P 500
---

______________________________________________________
Got something to say? Send us an e-mail at fastmoney-web@cnbc.com and your comment might be posted on the Rapid Recap! Prefer to keep it between us? You can still send questions and comments to fastmoney@cnbc.com.

Trader disclosure: On Dec. 4, 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (ATVI), (DIS), (SWY); Najarian Owns (TSL) Options, (XMSR) Options, (YHOO) Options; Finerman's Firm And Finerman Own (GS); Finerman's Firm Owns (JWN), (KSS), (WMT), (YHOO); Finerman's Firm Owns (MSFT) Options, (BIIB) Options; Finerman's Firm Is Short (IJR), (IYR), (IWM), (SPY), (MBI), (LEN); Finerman's Firm Is Short (MDY) And Owns (MDY) Puts; Finerman's Firm Owns (HD) And (HD) Puts, Finerman Owns (HD); Finerman's Firm Is Short (LEH) And Owns (LEH) Puts; Finerman's Firm Owns Russell 2000 Puts; Vivendi Owns 20% Of NBC Universal, The Parent Company Of CNBC