Update: Paulson hints of ARM rate freeze

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Good morning. Treasury Secretary Henry Paulson (pictured) gave an update of the housing landscape today. Among the points he made: ‘After years of unsustainable price appreciation and lax lending practices, a housing correction is inevitable and necessary,’ Paulson said.

Update: Here’s another headline in the Paulson speech -- he floats the idea of expanding the sub-prime rate freeze to borrowers with good credit who face ARM resets. Here’s the hint at help for ARM borrowers:

‘We need to see all servicers reporting results to HOPE NOW to measure effectiveness and then make adjustments as needed. This may include using elements of a systematic approach for adjustable-rate mortgages other than sub-prime if it will benefit homeowners and investors.’

You’ll notice I have substituted the word ‘slump’ for ‘correction’ in the headline. Paulson is from Wall Street, where the word ‘correction’ means a significant decline in prices. A slump.

I give him points for speaking a little truth today. This is a part of the housing story that is often notably absent when politicians and policymakers discuss the various things that can be done to prop up the housing market. They often make it sound like some terrible, unforeseen, unfair crisis has landed on American homeowners. Good for Paulson for bringing a little intellectual honesty to the political discussion.

Hat tip: Cal
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Photo Credit: L.A. Times