Deal won't help those behind on mortgage

By J.W. Elphinstone - Associated Press

NEW YORK — Few outside Washington and Wall Street may understand what Fannie Mae and Freddie Mac do, but the government's bailout of the two is likely to be felt in cities and suburbs across the country.

The takeover will be good news for those looking to buy a home or hoping to refinance their mortgages if it leads to lower interest rates, as experts expect.

But for homeowners already behind on their mortgage payments, or who owe more than their homes are now worth, the plan unveiled Sunday by Treasury Secretary Henry Paulson offers little relief.

"The bailout will give the mortgage industry a stability that we haven't had in a couple of years," said Rich Cosner, president of Prudential California Realty. "But frankly, no, it won't help (struggling borrowers) to refinance."

While not a cure-all, the bailout is still a step in the right direction, industry observers say. It will at least "keep the lanes in the mortgage freeway open," said Greg McBride, a senior financial analyst at Bankrate.com, possibly putting the market on the road to recovery.

If mortgage rates fall, that will attract more potential buyers into the market, which will help to prop up home prices, he said.

He expects mortgage rates on a conventional, 30-year fixed-rate home loan to fall over the next few weeks as the dust settles on the bailout. Rates, which now average 6.35 percent, could fall as much as half a percentage point, he said. But continued investor wariness and a depreciating housing market will keep rates from dropping further.