A Life Raft for Subprime Borrowers? - Bush, Banks Working to Freeze Mortgage Interest Rates for Trou

[RamboLiberal]

Source: ABC News

The Bush administration is working behind the scenes with industry on a plan to extend lower, introductory interest rates on home loans before they reset at higher levels amid hints by Fed Chairman Ben Bernanke of another cut in a key interest rate to keep the economy from falling into recession.

Treasury Secretary Henry C. Paulson and other top regulators met Thursday with loan servicing companies -- firms that collect and distribute loan payments -- and other industry executives. No formal agreement was announced, but an accord on this issue could be be revealed in the next week or two.

"We've all agreed that there should be some sort of standardized approach to reaching more homeowners faster," Treasury Department spokeswoman Jennifer Zuccarelli, who declined to name those at the meeting, said in response to questions.

A story published Thursday by American Banker named Washington Mutual Inc., Countrywide Financial Corp., Wells Fargo & Co. and JPMorgan Chase & Co. as companies participating in the briefing.

The mortgage industry and federal regulators have been under intense pressure from activists, lawmakers and consumer groups to help borrowers stave off foreclosure, particularly as adjustable-rate mortgages begin to reset, meaning much higher payments.



Read more: http://abcnews.go.com/Business/PersonalFinance/story?id=3936192&page=1

[aquart]

1. Trou= Troubled Borrowers.

How does freezing the rate help if they already can't pay it?

[mrdmk]

9. Think 1969, there was a wage freeze, in 1972 came a price freeze

neither of which did nothing other than make a mess of the economy (i.e. the war economy).

If one has a particular problem, fix it with a particular solution. This big band-aid solution is not going to help the homeowner in trouble. It is going to put off the problem that the lending institutions will have and let the homeowner sink into the mire. That is a short term big band-aid.

[spotbird]

18. So much for the free market. nt

[Orsino]

12. Well, it would slow borrowers' spirals into debt...

...and might delay foreclosures. Maybe?

And it might cost lenders nothing, since as you say the defaulting borrowers aren't able to pay more. If * is going to pretend to care, this might be the way to do it.

[tomreedtoon]

14. No, it's Dropped Trou. Pantsless Borrowers.

The old "barrel" metaphor no longer works. It's all those people foolish enough to believe they could own their own homes. It isn't that they're too dumb to put on pants, it's that Republicans and the rich have taken their pants away.

[sandnsea]

33. Most can pay

It's only when the interest rate resets that they can't pay.

[JeanGrey]

34. I just recently got back in contact with an old friend, and she is

in the process of bankruptcy because of these types of loans!! Not only that, she WORKS in real estate, and should have known better. She had a first and second mortgage, the first one went from 900 to 1375 and the second one from 2 something to 4 something. I asked her why on earth she was dumb enough to take out these mortages and she said "they gave me the money without qualifying, otherwise I couldn't have afforded the house I wanted". What can you say to that? Now keep in mind they were renting a house already, a very nice one. So she was saying she KNEW what she was getting into. Now she claims she is doing something in foreclosure and the banks are reducing her payments, she will declare bankruptcy and save her house, and they will refinance in six months. I didn't know what to say...................

[sandnsea]

38. One person isn't everybody

Just because she didn't set her rate when she had the chance, doesn't mean nobody did. Besides, why not bail out working people for a change. We do it for big business all the time and they're the ones who set the rules of the game and really ought to know better.

[JeanGrey]

42. I think it should be illegal to give these types of loans. It will

mean less home ownership if qualifying and job proof and credit is required, but at least these loans will stop. When husband and I bought our first house and the succeeding ones, we had to qualify, via credit and debt ratio, etc. And I STILL see those ads "$600,000 loan, 600 per month!" How anyone in their right mind could walk into this is beyond me.

[Doctor_J]

2. Wha??? Mr. Free Market wants Big Government to intervene

with burdensome regulation that will set us on a slippery slope toward socialized home ownership? Don't do it, Comrade Smirk!

[PassingFair]

23. LOL! n/t

[Honeycombe8]

28. Big government intervenes all the time, to help "its friends." Like Chrysler...

you may not be old enough to remember that, but WE paid taxes to bail out Chrysler years ago, when it was mismanaged horribly. And we see that the U.S. automakers have not gotten any better at managing its business!

Big government - Bush's big government in particular - has been subsidizing big oil for years.

And now, surprise surprise....it wants to subsidize the banking industry, to bail them out for their misdeeds and horrible, maybe unethical, business practices. Why? Two reasons: One is that it will help the economy generally, they believe. And TWO - more importantly - they'll help that part of the economy recover hopefully by the time the presidential election rolls around. AND THAT'S THE MAIN REASON!

I feel for the borrowers. But the bail out won't help those that need it most. And also....I think that many of those buyers knew they could not afford those homes. Live and learn.

[whistle]

3. That will set up everyone for yet more real estate bubbles in the future

...they hope to defer the problem onto a Democratic White House and Congress in 2009 and beyond.

The solution is not more of the same failed monetary policies, but real long term job creation and living wages for everyone. Jesus, then assholes will just not learn from their mistakes or abandon their greed!

[rzemanfl]

29. Exactly. Whistle's Momma didn't raise no fools. n/t

[Yavin4]

4. Why? What Happened To "Free Markets"?

So, the people who were not duped into these crazy loans should have to bail out those that were? Why should the people who were prudent with their money pay inflated prices for goods and lose percentage points on their savings accounts because some people thought that buying a $500K house with no money down or low mortgage payments for the first two years was a good idea?

Besides, sooner or later, these rates will be reset higher no matter what the government does. The problem here is that everyone focuses on how to make debt easier to get instead of focusing on how to build up wages.

[InkAddict]

26. Boy, you had me going there for a minute re:

your first paragraph. Duped into crazy loans, you say? Some were very prudent and conservative w/their money until "free market" crazies outsourced and H1Bd whole sectors of the USA's productivity, namely in IT and manufacturing. Can you imagine how hard it's been to chase down career-path opportunities every 3-12 months while watching the savings go out the window during the lengthy periods of unemployment/underemployment sandwiched between and while everyone continues to tell you not to give up,to keep on hanging, as the security you once built is maliciously scuttled and all you get are prayers from the faith-based crowd that used to be your family, if they're not in the same boat, too. Also, I figure some of us saved the taxpayers big bucks by taking on the burden of caring for the oldest among us at home, or through that "consumer" spending instead of cutting and running from the responsibility and dumping it in Medicaid's lap because our loved ones didn't have the sense or knowledge to plan more carefully or just didn't have the "mind" to know they weren't going to just drop over but would linger on long after their funds would support their proud independence.

I agree w/you. One needs to take this back and put the blame squarely on the original source of the problems - 1) Regun's deregulations; 2) Killing American jobs that paid a living wage in the name of "free trade" instead of regulated fair trade (Sorry, this means Clinton too); 3) Killing work-related educational spending for American workers, and I'm not talking reimbursement for B's or better. For those not yet in the workplace, the runaway cost of education leading to huge student loan debt loads on top of even frugal living and/or commuting expenses in dorms or off-campuses. Overall this, is the out-of-control escalation of healthcare costs, insured or not, that impact EVERYONE, even those doing what they can to prevent illness or at least catch it BEFORE it's even more expensive to treat; 5) *'s tax cut; 6) Irresponsible lifestyles centered on recreation, entertainment, and the HIGH life (sex, drugs, alcohol and sociability without accountability).

My $0.02.

[Yavin4]

39. What Does Your Screed Have To Do With People Buying Homes That They Cannot Afford?

The feds allowed the sub-prime mortgages to happen in order to create the illusion of a middle class.

[JeanGrey]

35. Not all of them were duped. See my post further up.

[Yavin4]

40. JeanGrey, This Statement In Your Post Is the Crux of the Problem

"they gave me the money without qualifying, otherwise I couldn't have afforded the house I wanted".

What ever happened to fighting for wages that could pay for her home? Whatever happened to voting for politicians that would make it easier for your friend to form unions or make college and healthcare affordable?

Today, Americans want things that they cannot afford, and our federal regulators allow them to buy whatever they want whenever they want in order to appease the masses and lull them into this false middle class sense of security.

[JeanGrey]

41. They had a nice house they could afford BEFORE they

got into this mess. So I'm afraid I don't have much sympathy.

[Lance_Boyle]

5. I hope no bailout unless proof of occupancy is shown.

There should be NO saving the fucking flippers from what their greed has wrought.

[Wcross]

7. Investors take risks- no bailouts!

If we bail them out should we bail out people who speculate on stocks?

[Raoul]

11. Definitely - bail out investors

Yes, most definitely you should bail out investors beginning with me. Now send my my 350K that I lost during the 2000-2002 bear market. Send it in 10s and 20s immediately. And if you act fast I will send you a free set of dinner knives.

[dysfunctional press]

10. if it weren't for the investors, they wouldn't even be considering it.

they're only there to serve their base.

(and will everyone please take note of the proper forms/uses for: they're, there, & their)

[Javaman]

16. That would be true if it was only a few flippers...

but give the breath and width of the housing bubble, it proves that there are a lot more morons in this nation than anyone first thought.

Unless something is done yesterday, this housing problems will destroy the economy.

Yeah yeah, flippers should fry in hell, yeah yeah, they deserve their misery.

But you know what? I don't want my dollars to continue to lose value because I felt all smug and refused to do the right thing.

even if the rates are frozen, the flippers will still be hurting, just not at depression levels.

hopefully the best upshot to this whole mess will be; people will be more mindful in the future regarding investments and spending what they don't have.

but sadly, when given enough time, humans will never fail to disappoint. LOL

[gratuitous]

6. Gee, more big government interference in the private sector

I thought the Republicans were against that. You know, the magic of the marketplace and all that.

Of course, the immediate beneficiary will be the banks and other lenders who would otherwise have to repossess overpriced houses that they don't really want to take over. Any efforts right now just maintain a stream of income to lenders. If the buyers can use any breathing space to crawl out from under, good for them, but the short-term and long-term relief really goes to the lenders, who will keep getting payments on the huge mortgages they wrote. The buyers are still saddled with a mortgage bigger than their property value, and will be for many years to come.

[Psephos]

43. Ok, point taken, so what do *you* recommend? n/t

[fascisthunter]

8. Government Being Used to Help the "Free Market" Again?

my oh my...... I thought government wasn't supposed intervene with the market. :sarcasm:

another conservative talking point goes right down the drain. Seems like it everyday.

[On the Road]

13. This is Why It's Good to Have a Pro at Treasury

rather than a hack like Larry Lindsey, who might have just shrugged and let everything go down the toilet. This crisis needs leadership and a heavyweight at the helm who can talk the financial industry into crossing some lines they're not used to crossing.

Freezing rates is a good solution. Lenders will forego the extra interest they talked borrowers into in order to keep the loans from foreclosing and keep more people in their houses. If it works, it should be good for everyone. Even if it doesn't, it will soften the blow. The losers will be the vultures who would swoop in in a crisis to buy undervalued assets.

[Javaman]

15. Damn, someone must be reading my posts.

I have been saying this for months now.

[bain_sidhe]

17. Yeah! Postpone the resets until a Dem. is in office

Sorry, maybe I'm being cynical, but postponing the reset is just postponing the problem, and I'd be interested to see how long a postponement they're proposing. With these sub-prime ARMs, it's the reset itself that's the problem. They need to convert them to a reasonable-rate fixed mortgage. Anybody who can make the monthly payment that a sound mortgage would require is "saved" anybody who can't, shouldn't be in that house.

Oh, and for the seriously inflated "bubble" markets, they should also do a "cram-down"* (new term I learned in the Economy forum) - issue that aforementioned fixed rate mortgage for the fair market value of the house now, and treat the rest as unsecured debt to the bank. The borrower still has to pay it if they can, but won't lose their house if they can't.

*This would only apply to people's primary homes though. No cram-downs for investors, I think.

IMHO, of course.

**edited to add the bit about investors**

[spotbird]

19. How will this help home values?

People still can't sell.

And with real inflation in the double digits, who provided the subsidy?

[customerserviceguy]

20. It won't help home values to rise

but it might prevent a complete free-fall from happening. The Repukes cannot afford to have such a massive deflation in housing prices in an election year, and the crooked lenders cannot afford to have their collateral plunge in value much more than it has. If they act without government, they run up against antitrust law, if they partner with government, they've escaped that noose.

Serious shit is going to happen, this is Chimpy and the mortgage moguls trying to bail out as much water from the Titanic as they can. If they succeed, they get a Rethug elected as president, if they fail, they postpone the biggest part of the pain to a Democratic administration. Win-win for the money people.

[spotbird]

27. Antitrust!

(slaps face) Now I get it.

The problem is that even with this give-away, sensible people will walk away from their money traps.

Who will pay for this, to the extent that it is implemented?

[slackmaster]

37. Home values in many areas of the USA are too high and NEED to come down

Let the market work.

[Jacobin]

21. Yeah. Let these time bombs re-set during a Dem presidency

Fuckwads.

All they are doing is lengthening the fuse to the economic bomb about to explode to drop it in the democrats lap

[PassingFair]

24. If it's any consolation...

I think they're too late.

I really do.

I think the "fuse" is shorter than they think.

Not that that's any consolation, really...

[donkeyotay]

22. Free ponies for everyone. And while you're at it, cut the interests rates

for those paying their mortgages and those paying rent. Shouldn't those who "work hard and play by the rules" get a little sugar from that big ol' Sugar Daddy, too?

[rzemanfl]

30. No, free ponies for the rich, horseshit for the rest. All this means

is that folks will be able to rent their homes from the banks a while longer, until a Democrat is in the White House.

[cliss]

25. It doesn't matter if they freeze rates.

These people won't be helped, even if they freeze distressed homeowners' rates to previous figures.

The real estate market is sinking.
The value of homes is going down, down, down.
At a steady pace. Even if they "rescue" the poor home owner with lower rates, the house is still losing equity. More and more people will be upside down, and there's absolutely nothing they can do about it in Washington. People will bail and /or walk away from their homes because even at their previous rates, the house isn't worth it any longer.

It's like plugging up a bunch of holes in the dam. You look up, and you see hugs cracks. The dam's going to break anyway.

[rzemanfl]

32. In this instance I don't think upside down it the key alone, upside

down and cheaper to rent is. All these people having to move is going to drive rents up, I think.

[AnneD]

31. I'll believe that....

when pigs fly out of my butt. Just watch this, it will be attached to some kind of bill that either benefits his friends financially or give his friends some kind of immunity from prosecution or or some such thing.

[slackmaster]

36. They should cut my mortgage rate to 1.9% and freeze it there too

Otherwise it's not fair.