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MADELEINE BRAND, host:

From NPR News, this is DAY TO DAY.

There could be some relief coming for homeowners caught with subprime mortgages, people whose payments are about to soar with higher interest rates. The White House is working with banks to temporarily freeze interest rates. Some economists say it's a bailout.

MARKETPLACE's Nancy Marshall-Genzer is here now. And Nancy, how would this plan work?

NANCY MARSHALL-GENZER: Well, it would give people a break who have adjustable rate mortgages. Interest rates and more than two million of these loans are scheduled to jump over the next two years and jump a lot. In a lot of cases, people thought they could refinance out of these loans before the rates went up. The value of their homes plummeted and they couldn't do that. So this deal would give them a bit of a breather and keep their interest rates from going up as they're scheduled to do.

BRAND: So that seems, on the face of it, like a good idea, helping people stay in their homes and helping neighborhoods avoid the problems with abandoned homes. What's not to like?

MARSHALL-GENZER: Well, some economists are worried this would just sort of delay the inevitable, and they want to be sure we're not keeping people in their homes longer who are frankly going to be foreclosed upon anyway.

One economist I talked to, William Polley of Western Illinois University, wants to be sure that this plan wouldn't apply to people who were actually flipping properties.

Professor WILLIAM POLLEY (Western Illinois University): You'd want to limit this to people who are living in the homes. You don't want this to apply to people who've got multiple properties and were getting in over their head that way.

BRAND: So no absentee landlords. William Polley worried that this could be rewarding bad behavior?

MARSHALL-GENZER: Exactly. And he definitely doesn't want people to actually get used to government bailouts.

Prof. POLLEY: The banks are going to have this episode in the back of their mind, and they're going to be thinking next time this happens, maybe there will be another bailout of this kind.

BRAND: Well, Nancy, bailout - who's paying for this?

MARSHALL-GENZER: That's the $64,000 question. Of course nobody is saying exactly how much it'll cost. This deal won't officially be announced until next week, by the way. Some banks are afraid, though, that based on what they've been hearing, little details that have been leaking out, they're afraid they'll be paying a hefty price. And one analyst was quoted today complaining that banks are going to be forced to keep bad loans on their books.

BRAND: What about investors, Nancy? Would they lose money under this plan?

MARSHALL-GENZER: Hard to say. Again, kind of a mixed reaction here. Some people are happy. They say investors would actually benefit because they would avoid the cost of foreclosures and that's estimated at $50,000 per loan. Other people would just say were prolonging the inevitable and prolonging the question of who pays.

BRAND: And what about Fed Chairman Ben Bernanke? He is considering lowering interest rates. Is he on board with this?

MARSHALL-GENZER: Hard to say, again. But last night in a speech in North Carolina he gave a strong hint that the Fed will be cutting interest rates again when it meets on December 11th. They did that at their last meeting in October. We'll just have to wait and see.

BRAND: All right, Nancy. Thank you very much.

That's Nancy Marshall-Genzer of public radio's daily business show, MARKETPLACE. And MARKETPLACE is produced by American Public Media.

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