Reply #13: They should convert all mortgages into 4% fixed rate.

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Many of the ones that failed initially were ARMs where people who were borderline credit risk saw their payments increase from $1500 or $1800 monthly to $3000 monthly or more. They couldn't pay this higher rate, they defaulted, leading to foreclosure.

As this started happening all over, the property values of other homes nearby decreased so those with standard fixed-rate were finding themselves paying more than the home was worth. Some decided to walk away, defaulting, and leading to yet more foreclosures, and yet even lower property values for those remaining.

This vicious cycle continued for several years.

Convert all mortgages to 30 year, 4% fixed rate, backed by the federal government.

A $250,000 financed home, with such a setup will have a monthly payment of around $1560.

At 5% fixed rate, the monthly payment is above $1700.

Anyone have their homes at 7% or higher? At $250,000, such a home would have a monthly payment over $2000 @ 7%.

Consider many of the homes in CA that were selling for $400K or higher.

What's the difference in such a home financed at 7% versus 4%?

$400K @ 7% = At least $3200 monthly payment

$400K @ 4% = About $2500 monthly payment

That $700 difference monthly is huge.



1.) Make all mortgages 30 year 4% fixed-rate, with federal government "insurance". Note, this is only for homes that people will actually reside. Their primary residence. House flippers or those that want a bunch of homes pay a higher rate, say 5%. Homes were meant to be lived in, not bought and sold, traded around like collector's cards.

2.) Eliminate ARMs. Sure, they seem like a good idea at the beginning, especially when monthly payments are low. However, the payor is playing a betting game with the lending company that they can refinance or sell the home and pay it off before the payments increase. They often lose this game, taking other people with them.