Feds and banks are near an accord to freeze subprime rates for certain borrowers.

The Bush Administration and certain banks, including Wells Fargo, Countrywide, Citigroup and Washington Mutual, are apparently close to reaching an agreement that could freeze subprime rates for certain borrowers for up to seven years.

In question are the subprime loans that carry a low "teaser" interest rate for the first two or three years, then reset to a higher rate for the remainder of the term, which is typically 30 years in total. If no action is taken, rates are expected to adjust on these loans from the current 7% or 8% to anywhere between 9.5% and 11%.

According to the Wall Street Journal, included in this so-called Hope Now Alliance are lenders, investors and mortgage counselors that apparently represent 84% of the overall subprime market.

Treasury officials fear that the number of loan defaults will continue to increase if an accord isn’t reached to ease the current subprime meltdown.

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