The mood in financial markets lightened temporarily on news that US Treasury secretary Hank Paulson, together with US loan providers and servicers, plans to limit the negative impact of impending interest rate resets on US borrowers. It is estimated that 1.8 million sub-prime loans will reset by the end of 2009. Some 1.2 million of the borrowers are unlikely to be able to afford the higher rate that their loan will reset to. But while the possibility that the housing market might be offered some relief boosted certain sectors, the concern in structured finance circles was that residential mortgage-backed securitizations would be negatively affected by the reduction in loan payments.
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