Paulson came out Monday in a news conference aired on CNBC and stated that the "freeze" plan is nearing completion, yet I can see this is not just a supposed bailout of borrowers as it also is a bailout of lenders, something the government has been saying they would never do.
How so, you say? Simply this. By "freezing" rates and keeping some homeowners, those who meet the undetermined criteria (more on that later), in their homes because they can continue making current payments, you are basically prolonging the inevitable, foreclosure.
That also means the lenders do not need to foreclose on that property right now and can spread their "losses" over several years, thus bailing them out even more so than the homeowner the government is trying to help.
You see, lenders are facing foreclosures of epidemic proportions, so any slack they can get, they will certainly take. By freezing the rates at the "affordability" level, the banks can stave off some of their losses, maintaining increased liquidity and staving the high costs attributable to foreclosing on the property. This is something many lenders, like Countrywide, desperately need.
So, if the program goes through, as flawed as it may be, it will appear as a homeowner bailout program, but reality is not always as it appears. This reality will be a lender’s bailout program in disguise.