Translation: “Kick it down the road five years for the next administration to handle, and hope the housing market recovers.” Washington at its finest.
}:-)4
Let the deadbeats wither on the vine.
While I totally agree that this freeze is idiotic, the idea of the far left Chronicle lecturing anyone on the free market is hilariously funny.
Gotta keep housing prices up. Don’t want them to fall and keep people from refinancing to aid consumer spending. And don’t want the banks to lose money. Who cares if lower prices hlep first time buyers.
WTF are a bunch of Republicans doing by screwing with the market?
Talk about unfunded mandates—investors, the Fed and the federal government don’t want to touch that stuff, so they propose that local governments float bonds and be on the hook to bail it out.
Freezing ARM adjustments represents a mass invalidation of private party contracts and further wipe out investors. It also would likely cause no one to ever buy a mortgage-backed security again (at least adjustable ones). Minimally you won’t get the rate discount so much on ARMs because resets will no longer be credible. Guess what that will do to the market?
Finally, such borrowers are likely to be underwater equity-wise and can’t afford the payments on a fixed-rate mortgage. All this does is put the borrower in deeper in debt and ensure that they will leave a larger blast crater in five years.
Busts are part of the natural cycle of free markets. When you interfere with them, you either prolong them get a bigger explosion later.
I wonder if anybody will even buy mortgages any more after this turn into corporate fascism. Bought a bond? Thought you knew what the rate of return would be? Nope, sorry, we’re the government and now your rate of return is cut in half. It’s for the good of the country (i.e. banks).
“You’re just giving the junkie more dope,” says Christopher Whalen, managing partner with Institutional Risk Analytics, a consulting firm.”
No it’s not.
It gives the market time to work. Many of these people will get a little time to get refinanced or sell the homes.
It will stabilize the housing market which will be good for everyone.
It is stupid and one of the eventual results will be that the middle class will have more trouble getting home loans and the original loans will come with higher interest. The bank will not choose to lose money, I can guarantee that.
So my daughter and son-in-law who have never missed a payment on their sub-prime loan by doing what was necessary to keep current - will also get their loan rate frozen, or does it only apply to those who are dead beats.
Only the fourth group would get help.
So then how is this "giving the junkie more dope?"
This is a situation where people who are a bit overstretched when you consider the rate increase, but are paying the pre-adjusted payment just fine, are being given enough time for the market to quiet down to refinance the loans. These are people who WANT to pay their bills, they're not "deadbeats" or "freeloaders."
You're not propping up deadbeats who can't pay on time even now, nor are you helping those who don't need the help. Granted, one could make the argument that it's unfair to those who are paying the increased rates and can afford to do so, but I suppose nothing's perfect.
Face it...if this were left until a potential Democrat administration (which I'm still optimistic we won't have to worry about, but let's say we do) it would be a LOT worse, Hillary would straight-up GIVE taxpayer money to these borrowers. This is the best "solution" we can hope for - it addresses the political and economic need to do "something" and costs the taxpayers essentially nothing...it preserves the values of the homes of people who are innocent in the whole thing by preventing a huge rash of foreclosures, and keeps the banks from taking as big a loss.
Why can’t people just rent? And also, these people got their houses only within the past two years. It is hardly as traumatic to go through foreclosure than with someone who lived in a house for 20 years. They’ll deal with it, and move on.
I couldn't agree more.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
I think we’re all forgetting one major thing here.
It’s not new that lenders do what is called a loan “modification” similar to this, to help an INDIVIDUAL borrower or couple to stay out of foreclosure, because it’s a win-win generally for both involved. This is just a larger-scale version of that that involves a large number of people.
But still a small % of the entire market.
Can you say “moral hazard”?
Best comment of the month!!!!
And for the banks, it's the government providing the vials to crack dealers.