That 4% doesn’t exist in a vacuum. Those hedge funds don’t exist in a vacuum. Plus, we’re only seeing the first wave of this thing now.
We are seeing markets reacting to the speculative excesses. Its sad that people purchased homes beyond their ability to pay, if rates adjusted upward.
Its sad that people lost small fortunes in the Nasdaq insanity of the late 90s, too.
I’d rather the government stay out of it, other than protecting against fraudulent lending and ensuring adequate disclosure of terms.
I have an ARM, vintage 2004, and the disclosure was abundantly clear that the rates could rise, and even gave examples of what monthly payments would be under different rates.
I believe the “normal” rate is a bit over 2%. If companies can’t cover this type of exposure, they should not be in the subprime business.
Oh that’s right, they are now “getting out” of it, either thru defaults or not offering new subprime loans.
Maybe they’ll stop lending to illegals while they’re at it.