I want my ARM rate frozen too
The weekend papers were full of reports about the Treasury Department and Federal Reserve Bank meeting behind closed doors with mortgage lenders, servicers and investors to work out a plan for a voluntary freeze in interest rates for some subprime borrowers.
I was fascinated by the stories — the New York Times and Wall Street Journal coverage had significant overlap — and I pored over them to try to divine their murky details. As I read, though, a niggling thought took over my brain: If anyone is getting their rate frozen on their adjustable-rate mortgages, I want mine frozen too.
I’m no doubt opening myself up to charges of heartlessness. I don’t have a an ultralow teaser-rate ARM. My loan isn’t subprime. In fact, I knew exactly what I was doing when I bought an adjustable-rate product. I understood the risks and benefits. I’ll be able to afford the consequences of a rate increase.
Still, why should I be the sap who pays just because the above is true? The Journal’s primer suggests that only borrowers for whom a freeze would make the difference between staying in their home and defaulting would be eligible for a freeze. Those who either can afford their mortgages without a freeze or can’t afford their mortgage under any circumstances wouldn’t qualify. Good luck deciding who doesn’t need the help. I’ve just told you I don’t need it because I’m being honest and I’m not sharing any numbers. Would I like to continue paying the same interest rate for the next five years? Hell yes.
The harm I suffer by this measure is philosophical. The impact on others is clearer. A group called the American Securitization Forum, which represents hedge funds who bought repackaged subprime loans, appears to be resisting the most the “voluntary” freeze proposal because its members stand to lose a lot. (Its investor members are listed here.) A rate freeze would cut into their returns. Who’d be helped? Lenders and servicers who can keep collecting on the mortgages they sold. Shares of Citi (C), Wells Fargo (WFC) and Countrywide (CFC) all shot up Friday.
(Look for more details and debate on this topic Monday, when Treasury Secretary Henry Paulson — who realized there was a mortgage crisis months after his former partners at Goldman Sachs (GS) figured it out — addresses the well-timed Second Annual National Housing Forum hosted by the Office of Thrift Supervision. Paulson is scheduled to speak for 15 minutes, but the day promises plenty of other fireworks. The agenda includes Countrywide CEO Angelo Mozilo, Toll Brothers (TOL) CEO Robert Toll (whom I had fun with in July), Fannie Mae (FNM) CEO Daniel Mudd, and American Banker’s Barbara Rehm, one of the best banking journalists in the country.)
The decision to freeze an interest rate or otherwise modify a mortgage is appropriately handled by the borrowers and the lenders, and, in our current reality, the investors who bought the loans from the lenders. They’re the lenders now. They’ll act in their economic interests, whether that be freezing a rate or forcing a default. Anything else makes a total sham of the system of lending money so a borrower can purchase an asset which, in turn, is pledged as collateral against the loan.
Heartless? Perhaps. I’d feel a whole lot more generous if my own mortgage payments weren’t headed higher.
Housing prices falling to ridiculous levels is great for those that made prudent decisions. I can buy investment properties at a reasonable rate and make money. Sound business decision.
To the real estate agent: When you work on commission, you should have looked ahead. Did you really think housing prices would soar year over year? You probably owned stock in internet companies in 1999 too. A fool and his money are soon parted. You are responsible for this mess too. Don’t blame the lenders.
I’ll give you .40 cents on the dollar for your overpriced house and you can move to a place you can afford. You never should have been in your house in the first place. WAH!!!!!
All you have to do is look at the market. I live in north Atlanta. Every house is 5000 sq ft ++ and costs about 600k. Joe average believes that he also can live in my neighborhood. My neighbors all drive hummers, wifes don’t work. Half the husbands do not work. My neighbor is a butcher at a grocery store. Come on people how can everyone afford a 500k house? I do not get it!!!
I am in Real Estate. Most of you are looking at this the wrong way. I also have an ARM (not Sub-prime) that will adjust in about a year. A sound and responsible decision based on my income, my future plans and market conditions at the time. It now will hurt me also. It is hard enough to make the payments now. I knew what the risks were and its going to hit me in the face. Not because I lived beyond my means or that I was irresponsible in managing money. The circumstances of the economy & RE Market plummeted. Along with all my friends who are holding on tight to any cash they may have, my income from RE has dried up. My income and house value dropped so much that my only option is to sell. I’m fine with that but now I can’t even sell with dropping the price way below market. Yes people with no money or credit bought much more than they could ever afford, and they are what has cause this current crisis, but I would say 90% of these people had no idea. The loan officers and many other RE “Professionals” talked them into it. Not everyone in RE, but too many of them are plain crooks. So many of these borrowers had no idea. They trusted the L.O. and they were lied to. They were told that they were protected because they would not get the money if they could not afford it. Many were taken out of affordable, secured, fixed rates and signed into these deals just to make money for the L.O. These people were scammed. Many responsible & savvy people read the fine print and knew the risk when they bought Enron too. Did the government bail these people out? No, but it also didn’t effect the national economy the way this would. More people own houses than stock in Enron.
All that said, its fine if you want to stick to “Buyer beware”. Fair enough, but the fact is that everyone will suffer if these people are not helped out. Mass foreclosure is not good for anyone, including all you “responsible” people. It will hurt the economy more, create more vacant homes in your neighborhood, and lower your home values. There are already steps in place to make it harder to get loans so we don’t run into this again. I’m not saying that we should buy everyone a house. Have a set standard to get a freeze and have their credit history reflect a bail out lowering their scores. Something. If people are making their payments, that means at least the economy is moving forward. Defaults mean we are going backwards. This goes for all the “Fixed raters” too. Keep people who are in trouble, in their houses with payments coming in.
I probably will not qualify for help on this plan. I will painfully get through it and will learn from it. Still I say we and the lenders need to get this done and go after those responsible for making this happen.
Many of the comments regarding freeloaders, etc. don’t take into account that the interest rates in excess of 10% border on usurious, regardless of the circumstances. I have a family member whose mortgage payment has doubled due to an ARM reset to a 12% rate. Tell me why 12% is necessary or justified? These are the same banks that send out convenience checks to credit card customers that are already over their credit limit (and then jack up the rate to 20% or more). There needs to be some fairness applied to the mortgage mess and 12% ARM resets are ridiculous.
FNMA recently announced that they will tack on an “Adverse Market Delivery Charge” of 8-ticks (.25%) to all loans delivered on or after March 1, 2008. Looks like all lenders will be passing that charge through to borrowers…gee, thanks Mr. Bush. I knew the rest of us would get to pay for the bailout somehow!!
Oh, and while those with new loans (or even refinanced loans) are paying for it, I’d love a freeze on my rate too. I started with a 3/1 ARM at 4.00%, last year it adjusted to 6.00% (still didn’t make sense to refi as that was lower than current rates - and get this, even with my payment going up $200, I still figured out a way to MAKE my payments! Novel idea.) But because my rate will be adjusting to over 7.00% next year, please, oh, please include me in the rate freeze!!
If anyone gets a cut or freeze, we all should. Why should we reward people living beyond their means? Gee,”Let’s reward irresponsible behavior so they go do it again.” My wife and I have a 30 yr fixed mortgage and have never been late. What do we get for being responsible????
And another VERY IMPORTANTpoint that no one is talking about. Anyone who borrows more than 80% of the home’s value needs to pay mortgage insurance every month. Mortgage insurance is supposed to be for events such as this. Why aren’t the people who provide mortgage insurance stepping in? Where are all those premiums going? Let’s talk about that!!
This is yet another idiotic and poorly thought out decision by the Bush administration. Why are other Repulicans in congress staying quit this plan? Why aren’t Republicans in congress pointing out that any fool willing to actively engage in shaddy business dealings deserves whatever they get? Why aren’t Republicans in congress mentioning that prudent and wise people like myself did not go out of there way to purchase a home they knew they realistically could not afford? Why aren’t Republicans in congress mentioning that people like myself have been living in crappy apartments for years just so they can AFFORD TO BUY A HOUSE, LET ALONE BUY ONE! Why aren’t Republicans in congress mentioning how this will artificially inflate already out-of-whack home prices, which by the way, is out-of-whack because of shaddy lenders and dumb borrowers. Why aren’t Republicans in congress mentioning that this a America and a free market system that does not reward foolhardy dimwits (aka dumb borrowers)?
I have zero sympathy for the idiots caught up in this mess because I was smart enough to know what is realistic, smart enough to ask the right questions and smart enough to know my limits. I have patiently been waiting for the market to come back to earth and now this idiot Bush wants flip-flop on his typically ignorant Republican rhetoric and “save America”. This is bs and I’m furious that Bush would even consider this.
Back in August, I paid several thousand dollars to get a 6.25 30 yr fixed rate, and I’ve always been extremely responsible with my finances. The way the irresponsible people are being rewarded is rediculous…
I say that everyone (and I mean those that take care of our finances) start calling their lenders and threatening to default if their rate isn’t lowered. The banks are in a position now where it’s not a matter of making more profit (all of it has been paid to their ex-CEO’s anyway), it is instead a matter of minimizing losses since foreclosures are the most expensive way to settle. The lenders should be willing to lower the rate.
agreed totally we need a break also .why is it that the good people get shanked all the time
I agree Paul from Oakland, CA. The market must correct itself and the pain everyone is feeling is necessary in order to stabilize an uneven situation.
OK OK OK, this just seems like the wild wild west of banking. So here is the latest scoop that came over the wire this morning. Basically a rate freeze, probably for 5 more years on ARMs for individuals who received loans at the start of 2005 through July 30 of this year with rates that are scheduled to rise between Jan. 1, 2008, and July 31, 2010.
I also understand this is for those that have been paying on time for the last 12 months and the property must be owner occupied.
Here is my perspective:
I really think this sucks and is unfair to those that are hard working, honest, fully qualified for a good loan (such as I) and are on a 30 year fixed loan.
OK so a bunch of bozo’s got qualified, no money down, no verification of income etc….. Get a great deal, get another great deal for 5 more years, and I’m stuck with my rate? I have good rates on all my properties, but why don’t I get a break, I was more responsible then all these other people.
I’m not in that type of position, however, over the next 2 months I’m going to be calling all the holders of my paper, and will most definitely may a HUGE stink about my rate and how I deserve better and without paying any fee’s to do so. I’ll post more about that as I get on the horn with these banks.
Have a great day and try not to think about these people as you right your check for the SAME amount for being responsible.
Jorge of http://www.123-easy-credit.com/talk
Very poor solution to the long term problem. No lesson learned, no consequences for these peoples actions. They are getting rewarded for not making good decisions or understanding what they’re getting in to. What about those of us that make educated decisions and are making it through? I understand the social and economic implications of letting this subprime issue continue to boil, but it makes me feel a little cheated for all the hard work and due diligence I put into the process.
To all of you with fixed-rate mortgages:
Thanks for scrimping and saving, when you could’ve enjoyed a more luxurious life. Your heirs will appreciate the inheritance. I’m spending every dime before I go, and having a great time doing it - including $4 coffees, twice a day. It’s only money, and you can’t take it with you. There’ll be no significant inheritances for anyone to live large off of my savings.
The Ant and the Grasshopper
CLASSIC VERSION:
The ant works hard in the withering heat all summer long, building his house and laying up supplies for the winter. The grasshopper thinks he’s a fool, laughs, and dances and plays the summer away.
Come winter, the ant is warm and well fed. Grasshopper has no food or shelter so he dies out in the cold.
MODERN VERSION:
The ant works hard in the withering heat all summer long, building his house and laying up supplies for the winter. The grasshopper thinks he’s a fool, laughs, and dances and plays the summer away.
Come winter, the shivering grasshopper calls a press conference and demands to know why the ant should be allowed to be warm and well fed while others are cold and starving.
CBS, NBC and ABC show up to provide pictures of the shivering grasshopper next to a video of the ant in his comfortable home with a table filled with food.
America is stunned by the sharp contrast. How can this be, that in a country of such wealth, this poor grasshopper is allowed to suffer so?
Kermit the Frog appears on Oprah with the grasshopper, and everybody cries when they sing “It’s Not Easy Being Green.”
Jesse Jackson stages a demonstration in front of the ant’s house where the news stations film the group singing “We Shall Overcome.” Jesse then has the group kneel down to pray to God for the grass- hopper’s sake.
Al Gore exclaims in an interview with Peter Jennings that the ant has gotten rich off the back of the grasshopper, and calls for an immediate tax hike on the ant to make him pay his “fair share”.
Finally, the EOC drafts the “Economic Equity and Anti-Grasshopper Act,” retroactive to the beginning of the summer.
The ant is fined for failing to hire a proportionate number of green bugs and, having nothing left to pay his retroactive taxes, his home is confiscated by the government.
Hillary gets her old law firm to represent the grasshopper in a defamation suit against the ant, and the case is tried before a panel of federal judges that Bill appointed from a list of multi-generation welfare recipients. The ant loses the case.
The story ends as we see the grasshopper finishing the last bits of the ant’s food while the government house he is in, which just happens to be the ant’s old house, crumbles around him because he doesn’t maintain it.
The ant has disappeared in the snow.
The grasshopper is found dead in a drug related incident and the house, now abandoned, is taken over by a gang of spiders who terrorize the once peaceful neighborhood.
MORAL OF THE STORY:
Vote responsible people into office and read what you are signing! No wealth redistribution or government hand outs. LET THE MARKET correct itself.
I agree. I do think you should be able to have yours frozen, too. I also think I should be able to have my fixed rate mortgage lowered. I did not get an ARM, but my fixed rate mortgage has turned out to be a bit much for me.
Freezing an ARM is effectively lowering the rate, so why only lower rates for the ARMs?
The politicians and media are framing the current mortgage situation as a “crisis.” It is not. It is simply the free market correcting a situation created by greed, recklessless and stupidity. Folks occupying houses that they could never afford need to vacate. Banks that made loans to people who had no chance of repaying them need to take a big hit. The chickens are coming home to roost and the politicians shouldn’t be trying to stop them.
I have read numerous stories about sub-prime borrowers who refinanced multiple times - each time taking money from the refinancing and purchasing cars, trips or whatever. I have no problem with the system trying to help the person who finds themselves in a hole through no fault of themselves, such as losing a job, medical problems, etc. But, to reward the free loaders who don’t want to save a dime anyway - put them on the street!!
This whole thing smells like the Savings & Loan debacle, which involved no other than President Bush’s brother. See a pattern?
“Bailouts” are not intended to help citizens. They are for businesses. To wit, the team devising the bailout plan included mortgage companies, but not mortgagees.
I absolutely agree with Steve from Kansas City, MO. The greedy (or stupid) people who signed on for mortgages that they truly couldn’t afford just because they were willing to do anything to keep up with their more fiscally responsible friends and neighbors are now calling out for government (or anyone’s) help in keeping their homes. They act like this mess isn’t of their own making, but for the most part, it is…and I have NO sympathy for them. Would I like to have my own rate frozen or reduced? Hell yes. But no one is offering to do that since I decided to forgo buying other things I would have liked to have in order to take a more stable, albeit higher interest rate loan.
If a lender decides to individually renegotiate the terms of a particular borrower’s loan, that is their perogative…but they do so at their own peril because they send out the message that if people take an ill-advised loan and then get in trouble, foreclosure won’t really happen.
I’m all for bailouts on a case-by-case basis as it averts a lot of issues including the insolvency of lenders, the hardship of deserving individuals, the safety and longevity of entire communities, and my own property value next to a forclosure.
The comments in the blog are heartless (as self-described), but the point is very good. Focus on the people that need help. If that doesn’t make the company solvent, that’s just bad business. But regarless if you’re republican or democrat, no one wants to throw away good money at a potentially bad solution.
I’m with you, Adam. If the Feds are handing out free candy, I want my share too. My husband and I have been in our home for several years. During the heyday of low ARM’s we refinanced because it made good sense, financially. We read the documentation and knew the risk; we could easily afford rate adjustments. With the low rate, though, we were able to double our mortgage payment with the plan of paying off our mortgage early. When we were notified it would reset to a higher rate, we refinanced to a fixed(we have excellent credit and continue to over pay our mortgage). Had I known the Fed would advocate freezing rate on the lower ARM, I would have kept it!
I consider myself to be liberal and in general I like helping others and the concept of shared expense and community. For instance, I would gladly pay more taxes to have a REAL health care system for everyone. However, this news of a mortgage bailout for idiots who bought homes they knew they couldn’t afford infuriates me. This is not helping anyone. It’s simply delaying the day of reckoning. In addition it’s completely unfair, unjust and actually against the law (remember it’s voluntary for the lenders…they are just playing PR. No one can legally force them to break their contracts). For the last 5 years I’ve been wanting to buy a house but realized it’s out of reach for me (unless I used an option ARM). Sure, I could have bought and jumped on the real estate easy money train. What’s next? What if I went out and bought a new 90″ plasma TV, a new car, took a few vacactions and put it all on my credit card with a low introductory rate. Then the rate changed to 17.9% and I could no longer afford to make the minimum payment? I think it is the government’s responsibility to step in and help me. They should force the CC company to freeze my rate so I can afford all this stuff.
Currently I rent. I have a nice life. It’s not like all this folks in over their heads in mortgages are going to loose a family member or a leg. They will simply have to downscale their lives and live like me….oh no, that cannot happen that would be economic disaster.
Talk about heartless - who says that the person who gets a sub-prime ARM and can’t pay the higher interest payment has “mismanaged” their money?
Maybe you ought to understand the circumstances a family is under when they go for these ARMs before you make snap judgements. Many of them are just trying to live from day-to-day the best they can. Mostly there are underlying circumstances that cause the financial calamity and not their “mismanagement” of money.
If you were paying more to rent than to pay a mortgage, what would you do?
I’m in the same boat as the writer of this article. I’ve got a 5 year Arm, that will be adjusting in 7 months. I knew what I was doing when I got it. I can afford to pay an adjustment or refinance. However, why should those who don’t manage their finances be rewarded while I get penalized. If these rate freeze goes into affect. I’d be best off taking my credit card debt from zero to max (and buying everything I’ve ever wanted) to show that I can’t pay for a rate adjustment. That way I could keep my rate at 4.25 vs 6.0. Now, I’d never actually do that. …but I’m just trying to prove the point that those who manage money well, would be hurt, and those who don’t would benefit. People need to learn to take responsibility for their actions!
I believe that everyone who took out ARMs should be bailed out. Those of you that have fixed-rate mortgages are jealous of those with ARMs.
1) The people who got ARMs live in bigger, better, and newer houses. The people with fixed-rate mortgages stay in old and small shacks that look boring on the outside and look even worse on the inside.
2) The people with ARMs are driving around in Hummers, BMWs, Lexuses, and Porsches. The fixed-rate homeowners are driving around in Minivans, Pruises, or cars that are old, loud and rusty.
3) The people with ARMs stay in beautiful neighborhoods and are maintaining their lifestyles by eating right and exercising. The fixed-rate people stay in neighborhoods where there are burned-down houses, crackhouses, abandoned houses, and empty lots. These people are also out of shape, too lazy or dumb to make decent meals, and are unattractive.
4) The people that hold ARMS are the sexy and exciting people of our society. They are paying less money on their houses and have more money to keep up their appearances and take trips. Those with fixed-rate mortgages are only envious because they do not have money to maintain an exciting lifestyle.
We all need to help the people with ARMs maintain what they have. Being jealous of those that are better than us does not help us to improve. I am going to support anyone who has an ARM. Being sensible and prudent is for senior citizens.
I am not a home owner. i live in Southern California. I want to buy a home in the future but because so many people have decided to pay too much for a home i can not afford one. now these home owners who did not plan for the future and do not have the income to pay there note want a bail out.Why even have a credit score. I need these people to default. this is the only way that home prices will get to a reasonable amount. People need to look at the numbers and their income. Would you buy a Hyundai for $100k . No you would not. Yet people are buying home for over 600k and having to rent every room in the house to be able to pay the introductory rate on an ARM loan. People need to be smarter.
Just want to add my 2 cents.
I have heard references to a “free market” in this country but I don’t think that there is a free market– it is manipulated at many levels I am sure, unless you call that “free”.
The US governments involvement in freezing the rates of homeowners who might lose their homes is an indication of just how close to the brink of calamitous failure our economic system is. Someday, we will be watching a documentary (LTCM style) on public television about the events that lead up to the breakdown of the US economy. The documentary will explain how the brightest minds in finance made some really horrendous errors in judgment and how greed clouded the minds of people who knew that what they doing was foolish and wrong.
I bought a home on a fixed rate many years ago and have paid on it faithfully, foregoing many other “things” that I also would have liked to have. The real estate and mortgage industries have “bid” up the price real estate to the extent that I could never afford to buy the house I am living in now. The result is much higher taxes and insurance; so much higher in fact, that I doubt that I can actually live here when I have to retire– I am angry about that. I don’t have any generosity in my heart for others who haven’t paid the price of fiscal responsibility. My friend who took a 125% mortgage and buys new cars keeps horses and has all the latest electronic toys will get a break and I will feel a bit resentful toward the “free market” that the idiot talking heads on television praise.
I would like to have my fixed lowered to the average teaser rate for the rest of my mortgage contract. That would be a start in making me feel better and then we can work on the phony appraisals that have caused my taxes and insurance to become nearly out of my reach.
Any reasonable person could see this happening years ago. I have no sympathy for any of them.
I would be in favor of a rate freeze if the interest from the rate change were added on to the principle amount of the original mortgage; e.g. current payment is $1000/month, new (unaffordable) payment is $1200/month, $200/month would be added on to the principle to be repaid at some point.
Folks stop your complaining. You suckers that play by the rules created this mess. Why you? You vote these incumbents in office election after election. You say you don’t vote along with two thirds of your fellow citizens? That is what I mean. Figure it out. Why should politicians listen to you. You don’t vote, so they can always count on your no vote to keep them in power. Try this out. You the silent majority decide to vote next year. You vote against incumbents be they Democrat or Republican. You clean house in Washington D.C.. Can you do any worse than the garbage you have in power now? This will send them the message. Don’t F with us, you created this mess and now you are trying to stick us with the bill!!!!!! This is where your energy should be focused on. Not crying to your mortgage company to give you a break to. By the way why don’t you hold off until the 2012 election before you take action. I just rolled out of my local Range Rover dealer in a new ride I just purchased. I know I can’t afford a 70K car but I always wanted one and the salesman said I don’t have to make payments for six months. I also need to get some bad wheels for my bad ride. I’ll charge that 10K bill on my deferred payment MasterCard. So give me six months to figure out how to get bailed out of my car payment and another twelve for my MasterCard bill. You know if everyone gets their cars reposed there will be a flood of cars on the market and that will depress the value of everyones car. Get it? Thanks suckers. Keep paying your bills and not voting. I also have to get some low profile tires for my ride.
I can’t tell you how happy it makes me to read all of these comments against this ludicrous proposal for a rate freeze. If you agree that there should be no bailouts for reckless lenders and borrowers at the taxpayer’s expense please email your representatives and tell them. On so many levels this action would hurt our economy and only encourage risky lending in the future. We must let the market correct itself; just imagine our government “freezing” the stock price for one of the .COM’s after the market crash – well folks there is nothing different about this. This is money plain and simple, winners and losers. The question you must ask yourself is this: Who shall the winners to be? Greedy lenders and consumers or responsible lenders and consumers.
Bailing out the people whose ARM rates are now resetting higher is a kick in the groin for every responsible, intelligent borrower who strives to live within their means. If you were conned or scammed, by all means avail yourself of the fraud statutes, either civil or criminal. But don’t expect a handout or other special treatment simply because you made a really stupid decision !!!!
2 Words for you, people-
MASSIVE LAWSUITS!!
The LAST thing this market needs is to be once again, artificially propped up by the damn Government!! What we need is a good forest fire Malibu-style. Bottom line?? If you cannot afford the mortgage of your house–MOVE OUT, RENT, and let the market forces clean this rat’s nest out!!
Prices crashing will be the ONLY thing that restores balance to this market…the ONLY thing.
Take the pain now vs. stretching it out for 10 more years!!
It doesn’t matter what they do as long as the credit standards go back to normal. People die people get divorced, circumstances change and you need to sell. If nobody can qualify to buy your house at bubble prices it goes into forclosure.
If prices don’t fall people can’t buy you get a locked up market. If you freeze these rates nobody will loan this country money again at least at reasonable rates. Look what Citi paid care to do that yourself for everything you buy? The needs of the many out weigh the needs of the few. Let them lose their houses and get the price drops in quick so we can move on.
Another poster made a really good point, where are all the people that they’re claiming will be helped by this outrage? The real ones being saved are the mortgage servicers like another poster mentioned, the Countrywide Mozillos, etc. This is a bail out for the industry. The people have nothing to lose because the loan is more than the house value. If it makes you feel beter realize that some other needy family will move in when the previous one moves out. This thing is all about delaying the inevitiable. The administration is just trying to run down the clock until Nov 2008 by giving people “hope” to keep paying in order to qualify for their handout just around the corner. Thats the term they keep using, hope. Then when a democrat gets elected, the economy will be in the worst shape in 80 years and we’ll throw the bums out so the republicans can get back to destroying what used to be the best country in the world.
Also taxes forgiven are taxes that must be collected directly from others or indirectly in the form of inflation for everyone.
The only candidate that seems to be on the right side of this is Ron Paul.
Far from heartless, you are financially responsible! I did not purchased a house during the housing boom due to not having an income that would sustain a large mortgage. Unfortunately, I live and work in a area with a high cost of living that includes very high price ranges for housing. I am financially responsible and did not fall for the $0-down, flexible mortgage packages being offered. The people who did fall for these subprime loans were too uninformed or just optimistic they could weather the storm when their rates jumped. But excuses don’t make it - and they do not deserve to be bailed out to the detriment of the fiscally responsible. As most of us, I would like a fixed ARM also, but dream on…. Take responsibility, folks!
WEll let’s take a quick look at this.
On ARM’s the rates and payments are listed.
People were not duped, lied to, or conned. It’s all spelled out in the Truth in Lending Statement.
If they are too stupid to understand the $500k of debt they are about to enter, then they need to higher a lawyer.
If you still think they are duped:
The majority of these I bet are the no documentation/stated income. So when will they be arrested for loan fraud? That’s federal time.
I am all for the free, as long as everyone in a fixed rate mortgage that has been current get s 3% perm reduction. That’s fair because:
1. The free rate people are still in a bigger house than what they can afford
2. They need to be held accountable to their mortgage fraud.
3. It was a bad investment, I want my $$ back from Enron.
4. They will still pay less that what the people on the 30 rate mortgages are paying.
I say sucks to be them. Let them go into forclosure. The Amerikan dream is not guaranteed by the Konstitution or the Deklaration of Indenpenence. I will buy their forclosed house cheap and rent it back to them. They still have jobs and have to live somewhere…..
APARTMENTS!!!!
Paulson’s plan is a step in the right direction but does not go far enough. Also needed are laws to prevent investors holding mortgage-backed securities from suing anyone and from interfering with the workouts. State laws need to be changed to lengthen the period of time a lender must wait to foreclose, and to permit courts to intervene and impose a solution fair to both lender and borrowed in those cases when the parties cannot or will not resolve their differences voluntarily. For this problem to be resolved in everyone’s best interests, our society has to move away from looking a debt as a moral obligation and look at what works best to avoid hardship for everyone.
In not one article that I have read has anybody ever mentioned that this may be happening because the Lenders took away the programs that helped these people refi.
It is my stand that if the lenders where still willing to finance sub prime mortgages, these borrowers might be able to refi thier current loans, thereby getting out of the adjustable rate.
Did you know that the fc’s didn’t start happening until the lenders took away all the programs? I truly believe that the lenders knew all these loans were getting ready to adjust, so they started tighting lending standards. They wanted to make thier money with the increase in interest.
But, it back fired on them. Instead of people bucking up and paying the higher payment on a house that was losing value, they basically said screw you, take the house back. Now the lenders are crying.
I say, bring back the programs, at a fixed rate only, refi these people, and move on.
Since when did committing fraud and perjuring oneself on federal documents (loan apps) become the new definition of “victim”?
Let the banks get into the property management business they knew they were headed for, and let’s digest this bad meal and get on with things.
None’s stupid enough(maybe) to not now that they can’t afford a house. Even if you don’t know the jargon you know that 3/1 or 5/1 means you get an easy ride for 3 or 5 years, then you pay, Baby! I bought my house on a 5/1 ARM 4 years ago and I knew exactly what that meant, meant I had 5 years of an easy ride. I don’t know how much it’s going to increase afterwards but I’m making mega payments in these first 5 years of my easy ride because the only thing I know is it won’t be easy in year 6. But these foreclosure-proned people knew they were getting an easy ride for the first few years and didn’t plan for afterwards. Instead they went out and bought his-and-hers SUVs, custom wheels, etc. I say if they want help take their SUV in exchange for a few more years of their teaser mortgage rates. (They don’t get their SUV back, by the way)
It seems everyone sees through this bailout as completely outrageous. The real question is — WHAT CAN WE DO TO STOP THIS MADNESS?
I think tht you are absolutly correct. Just because these “homeowners” were to lazy to read the fine print and I did my homework why do they get a break for being greedy? I looked at every option and decided to go against this so called easy money loan and purchased a lower priced homethat I could afford. If they wanted to take advantage (as normally is the case - the YOU OWE ME mentality) then they shoudl be evicted form teh house. They knew this could happen but still purchased a home way out of their price range. Im sick a tired of bailing these people out for their stupiditly.
At the risk of being another addition to the ‘heartless’ column… What about all of those (us) homeowners that opted for loans with ‘frozen’ rates from the beginning? Back in’06, as the number of ARM loans were peaking, a lot of homebuyers opted for fixed rate home loans thinking that this was the safer play. While more expensive in the short term, a fixed rate home loan was not going to be subject to rate resetting and payment increases. That’s the trade off between the ARMs and fixed rates right? Those with fixed rate mortgages are making a bet that rates will increase enough in the future to offset the initial higher cost (in interest payments). But if we are talking about ‘freezing’ (i.e. ‘Fixing’) the rates on tens of thousands of ARMs, does this not amount to a perversion of the risk/return calculations that lead all of those fixed rate borrowers away from ARMs in the first place? I can tell you I sure would like to have paid $500 less on my monthly payment for 2 years only to have my rate fixed later at around the same rate as Fixed mortgages of ‘06. Now that’s having your cake and eating it too.
Why do we help financial institution who can’t handle their own finances?
Why do we have to help people who still are not being able to pay their mortgages?
This is their own responsibilities. Let free market take over not government agencies.
Or decrease my fixed rates too.
Well. I’m amazed to hear about current proposals of fixing “subprime problems”. It starts with freezing rates. Where will it stop? How about freezing apartment rents, prices on goods, services, commodities? How about freezing our free markets? Where will the communists stop? If having a republican president we have such attacks on our American values and responsibilities, I can imagine what will happen, if a democrat president is elected. Then, the redistribution of wealth will begin full speed. It’s a free Country, people make their decisions freely. Those who like free morgages can freely move to Cuba, North Korea or the USSR.
Not one of you people can look beyond your own anger long enough to understand that this needs to be done in order to stop the housing market from crashing further. In Florida, real estate is our third largest industry. Huge numbers of people have been laid off and home values are plumetting as the housing situation keeps unraveling. If this gives the housing industry the boost it needs to get back on track, then I’m all for it.
Two words…Moral Hazard…a sub-prime bailout would be nothing but a political band aid on a huge wound that has no hope of really stopping the bleeding. Whatever happened to taking responsibility for bad decisions and facing the consequences? This will only assure that there will be little if no lesson learned. Bailouts only encourage riskier behaviour in the future, but of course we already know this.
Who said recession was a bad thing? It is a natural correction to wash through excesses and ‘irrational exuberance’. It’s the truist form of economic and social Darwinism. This is a natural occurance that, if left alone, will punish poor decisions and bad bets while rewarding sound businesses and individuals — i.e. a free market economy (what a concept!). This is one critical element that makes America great. This proposal is immoral and as unAmerican as it gets. Folks, it takes more than a flag lappel and 911 rhetoric to be an American and this is yet another example of how this administration continues to ruin our country. Thanks for nothing!
If the lenders choose to reward their bad debtors by freezing teaser rates or reducing principal owed, well that’s their business I suppose.
All this talk though of the government forcing those kinds of terms is really troubling. But what infuriates me is the government’s refinancing of the risky loans. All those new FHA loans they are bragging about are simply transfering the risk and eventual cost from the lenders to us - the tax payers.
When I moved to Phoenix last year, I chose to rent since prices for decent housing were out of reach with. (Of course anyone could afford PAYMENTS at 2% interest only, but that’s not the same as affordning the LOAN.) Why should my tax dollars now go to pay for my neighbor’s house that they could not afford under normal financing?
Hopefully our politicians will see the so many strong sentiments as posted here and think again who they should be protecting.
What someone else getting freeze on their ARMs got to the with yours rate. What is the moral base that says if I don’t get the the same deals with these people I would be wronged. Government is not going to pay for these lenders it has nothing to do with the tax payers money. It is just a logical market regulation by negotiations so both lenders and borrowers mutually benefit. What good possible foreclosures do to other homeowners. They will decrease property values create empty houses. Of course people should be responsible for their financial decisions but other people shouldn’t cry when they are not included in any rate freezes they are most likely paying lower rates than these people anyways. How is someone paying 13% APR going to make you happy. Why wouldn’t you accept as an outsider what the lender accepts. What is the jealousy comes from very few people will benefit form these and they are very likely to loose their homes anyway. This will most likely benefit the mortgage companies and the overall economy becasue it will moderate the problems a little bit.
Punish the responsible and reward the irresponible!!!
Say goodbye to free markets!!!
My daughter and her husband both have college degrees with a baby on the way. They saved and finished their graduate work during this housing bubble created by irresposible loans. Many of their friends with part time jobs and little education questioned the decision to wait and be responsible by not get into a home they couldn’t comfortably afford.
This SLAP to free markets creates a FALSE bottom to housing prices, rewards irresponsibilty, and puts home ownership further out of reach for responible people.
And don’t insult us by saying it won’t be funded via the working taxpayers.
I can’t see how a rate freeze can help the homeowner because they couldn’t afford afford the price of the homes they bought which was probably at the peak. Also their incomes is not enough for them to own homes in the first place. What they need to do is work two jobs or marry someone or share their rooms to rent out to help with the payment.
I think lenders might have to switch those loans to 50 year or even 100 year mortgages. Freezing them does not help at all. If you freeze them for 5 years on a 30 year mortgage, does this mean they got free ride for 5 years since their mortgage is a 30 year adjustible. I guess interest rates much go to 3% for fixed rate in order to help these frozen owners.
Hey - after I get my rate frozen, let’s move onto solving my next problem: I want my money back - these magic beans I bought aren’t working out so well either… Sorry folks, not a lot of sympathy from me on this issue. I’ve had some loan officers upset with me because I insisted on reading everything I was signing, and I asked for clarification on the parts that I had trouble understanding. I think that’s just common sense, but I guess it’s true what they say: common sense isn’t common anymore.
The government is such a bunch of crap. Here they are again stepping in to help the STUPID people of America for being irresponsible. How about helping us out, the responsible hard workers that did our research and didn’t fall into the greed trap like everyone else? Can I get my rate lowered? I’ve already emailed Countrywide that I will never be doing business with them in my lifetime because they’re actually forgiving some of the debt from their subprime borrowers for being stupid. Good riddance!!!
stop manipulation! a freemarket should remain FREE!!!
This is “Hugo Chavez” economics at its best. Our elected officials need to understand the moral hazard of this type of action. What are they thinking? Can I get a bail-out too?
One must consider that these subprime loans are for the most part made to people who are strapped for money, perhaps make bad decisions, and are perhaps not the sharpest tacks on the shelf. Then you have to look at the rates. They get in at 5% or 6% and then the rates go to 13%. How do the “investors” (loan sharks) expect to get away with that?
You cannot take the poorest of people, the least discerning and then charge them twice what anyone else is paying and expect no consequences.
That is not help. It is using people. It should be illegal. When these investors get to meet St. Peter and he asks them what they did for their fellow man what are they going to say?
I am not a communist. I am a businessman. But a businessman with ethics.
Yes, I know. It is a free country. Nobody forced them to do it. It is illegal to sell cocaine to people who are willing to buy it. This is the same thing, only worse.
Where to begin with a comment? Most of these loans were stated income, therefore, if they are on time and want to be helped, they will not be able to prove income - they took out mortgages with 90-100% financing, no income verified in most caes, the investors put the money out there counting on increases in the rate. Now they are proposing to fix these rates for how long? 1yr is too long, what about everybody else that is making the payments when their loans adjusted, does their rate get fixed too? or do you have to be losing your house? oh, i forgot you need to be current! this is the ridiculus - the mortgages are now higher than the properties are worth, so at best they are giving some people time to still go find somewhere else to live - the banks, investors, and so forth took the risk, made the loans - created this nightmare of spiraling doom, now their balloon payment is due, pay up and deal with it. ( for the banks - this is probably a good time to think about opening a real estate company to reduce your losses, we know you’ll have the inventory.)
Bailout winners:
the banks!
irresponsible folks who gambled and lost!
chrony capitalism!
Bailout losers:
responsible folks who didn’t gamble w/the roof over their heads!
the taxpayers!
free markets!
a republic that values transparency and integrety!
brought to you by:
the Bush Admin. & wall st., kings of no responsibility, no regrets, no blame, and no shame.
It’s no more heartless to insist that interest rate freezes be applied across the board to all home borrowers than it is to say, buy one or two houses/condos and then try to “flip” them several months later to a needy home buyer for $50K more than you bought them for. Especially if you didn’t really do anything to fix up the property in the meantime.
Speculators, people who threw all their investment funds at buying real estate to flip instead of diversifying and people who had an idea that they were getting into a mortgate where their interest rates might change but now plead ignorance and exploitation at the hands of shady mortgage lenders should all be punished by the market forces at hand. If the housing market had not turned, they would all be sitting pretty right now and you can bet your last dollar that none of them would be coming forward right now to help out people who were priced out of the market by the continuing price increases.
I bought a home and went fixed rather than ARM with the notion that rates are low enough and will only go UP. This way I could budget my money and afford it at the current pace. I knew ARM was not the way to go, but DID I do wrong here? I guess I did. I should have gone ARM and then be saved when I crash. We are at a loss for making a honest decision to contain ourselves within our means. I don’t think this was too difficult to comprehend.
I pay my taxes that are going up every year. Perhaps we should all start defaulting on these and then they would come and save us.
Adam, I too agree with you and with most of the comments here.
Let the free market work.
Troubled home owners and lenders who made poor judgments should be responsible for their actions rather then being rewarded. I do not believe in home owners being “scammed” either. They should have done their homework especially when signing up for 30 year mortgage!!!
I have to cringe everytime I hear that something needs to be done to help those in trouble “save their homes.” Many of these people owe more on their loans than the house is worth. They own nothing except debt. The bank owns the house. Please.
In all of the message boards I read, who know who is not chiming in? The myriads of people who were “duped” into buying an arm without knowing what that meant? Where are all these people? Someone come forward and explain that they didn’t understand what “floating rate” meant. Shouldn’t we be seeing these people coming on the boards explaining how much this will help them? Could it be that there aren’t that many people who were tricked? Where are the people for whom this bill was designed?
Thank you, Adam, for this insightful article. When I was mortgage-green and buying my first home, my head was spinning from all the rates and terms thrown at me at the speed of light from a pretty blonde mortgage broker for Emigrant Savings Bank, I was sold an adjustable rate instrumenet from hell which I did not understand. I think that was the point: I was not supposed to understand that this ARM, which adjusted every quarter tagged to the 3-month treasury-bill, could go sky high, that I was being charged a higher rate than I was actually paying and this difference was accruing to my loan, aka “negative amortization” and that this was not explained to me. I did not even have a truth in lending agreement that outlined this loan from Emigrant. Luckily, when Emigrant bought this loan as part of a package from First Federal, the new lender could not generate the changes in rate every quarter and I forced them to modify (you have to know that word or they will only offer you refinancing) the ARM from hell into a fixed rate at the prevailing rate or they would have faced not meeting the truth in lending requirement. I got some pretty savvy advice about how to do this but I save myself in the end. But I also put down 25% on my property so I had a lot to lose from the outset. Why should the new wave of people caught up in the tide of ballooning rates be bailed out for either taking on too much risk or not understanding the real terms of their ARM loans? When this happened in the early 90s, defaults travelled back on the path from which they came: the sponsors/builders defaulted, the savings and loans defaulted and then the FDIC got the properties back. They in turn sold them at auction and that’s the way it should go this time.
I want my fixed rate mortgage to be readjusted by 2% downward! If irresponsible people who borrowed beyond their means, are going get a 2% rate discount — which is what freezing does, in reality — why should I, a responsible borrower, who took a fixed-rate mortgage, and paid my bills on time, not get the same 2% discount?
A class action lawsuit is called for, by every responsible borrower against every lender that goes along with this STUPID PROPOSAL. The good borrowers should not be unfairly penalized for being good borrowers.
Don’t think for a minute that the bailout is being done for the homeowner. It’s being done to bail out the mortgage companies that concocted this mess. I feel terrible now that I advised someone not to go for the teaser rate. She took a 6.75 for 30 years. Where’s her break, and everyone else who acted responsibly? I hear now that the problem isn’t just affecting those with a lower income; it’s, also, affecting the more affluent who overbought. Is everyone suppose to boo-hoo for them too?
I lost a couple thousand in Vegas about a month ago. I didnt fully understand Craps and I was drinking, those Casino’s took advantage off me. I want my money back or maybe i can pay them $20 a month and get my $1980 back so that I can try again. I know I understand craps now and this time I won’t drink
I’m not ‘heartless’, but I’m smart enough to be sure my financial arrengements are understood before I sign. And I’m smart enough not to gamble on appreciation of property to justify buying more than I can afford. The only reason to realistically feel sorry for these folks would be because we continue to bail out stupid property owners who rebuild in the same location following natural disasters and let us all pay for that! On the other hand, mayb e they’re NOT so stupid after all.
Every responsible homeowner who pays a fixed rate WILL BE TAXED to pay for the government bailout of people who allegedly cannot afford to see their interest rates go up. What a scam. I wish I had selected an ARM on a property I could not afford at a fixed rate so that I could then claim to have a right to a permanent low interest rate. This is perversely taxing and penalizing responsible homeowners, who will pay the higher fixed rate. If we are going to reduce interest rates, do it for everybody and tax everybody alike.
It is par for the course that the responsible people who signed up for 30-year fixed rates are being cheated while the irresponsible are being rewarded with continued low rates. And let’s not forget the fact that we all had to pay more money for our houses because these irresponsible people with their low rate ARMs helped cause the run-up in home prices. So the lesson learned is that if you see everyone acting irrationally you should do the same because if things go wrong the government will be sure to step in and help. Not doing so would be irrational.
for the few posters that said “don’t be so harsh, some of these people were conned or mislead by unscrupulous mortgage brokers”, give me a break! even loan docs from unscrupulous mortgage brokers state whether or not the loan is adjustable and by how much or has a prepayment penalty. no, the people that claim they were scammed were simply greedy, were tyring to keep up with the Jones and just had to buy and were too irresponsible to live within their means.
housing prices are flat out overinflated. you must let nature take its course if housing prices are ever going to become more affordable and sadly, that means hundreds of thousands of foreclosures.
This bail-out plan is totally absurd. The author stated “Risk and Benefits” and that is key here. These borrowers chose the route of getting the benefit of an Adjustable Rate because they could have a few years of below market pricing in return for the Risk of a higher rate later. This was their choice where other borrowers chose not to gamble and took the safe route of a fixed rate loan. They did not have the luxury of a few years of lower payments or the Risk either.
You are “heartless”, just like the rest of us. But so is capitalism. Only Communism is not “heartless”. Communism is a system where everybody is pulled down to the lowest common denominator. Is that all heart?
I would like to know more about how they are going to make these decisions on whether someone can “afford” the reset, especially because many of these were stated income loans. Won’t these people just “state” a new income that puts them in the “sweet spot” of being able to benefit from this? Or ask their employer to withold half their checks for awhile so that their income looks right? This will be a whole new round of liar loans.
If you read the WSJ story, one of the potential “victims” of the coming rate reset, actually took out $30,000 equity out of her house to pay off her Lexus!!! Beyond that, she refinanced her house 5 times!!!
Now, where is my BEEMER, Uncle SAM?
I don’t think you are a bit selfish. You did your homework when you applied for a loan, you did due diligence. I think some of the people who bought these loans were misled by banks, etc. I think those banks, etc. who did the misleading (and broke laws, ethics) should be the ones helping them not the government. The lastest arrangement is a bail-out Fannie Mae style by the Feds, I don’t like that either. The financials did this in the 1980’s with the S&Ls, now, they did it with subprimes and REITS. One bailout per industry is enough already. I preferred the rate freeze to this new agency deal.
I agree with all the people on the personal responsibility front. You can’t tell me that some idiot making $40k a year was duped into believing he could afford a $500k home! He knew all along that he couldn’t afford it or he would have bought that house in the first place instead of his modest $150k home he was living in comfortably before his eyes lit up at the easy money. I couldn’t care less what my equity is in my house because I have no plans to sell any time soon and I also won’t be drawing from the equity anyway. I’m not invested in the house. I’m living there. It’s not a cash machine and I’ll never treat it as such. I say let the lenders and borrowers both perish under the weight of their own folly.
I totally agree with you. Many of those people have maxed out their loans, invested their equity elsewhere and risk to lose nothing but their credit ratings which may have been low to start with. What about us, whose house are valued less and less every day because of them, shouldn’t we not be compensated for our loss in value. Shouldn’t we be given a lower rate also? Lenders, originators, appraisers, sellers, agents have all made money in these deals, many fraudulently, should they be allowed to go free at our expense?
I can’t believe this is happening. Here I have been resisting the temptations from ridiculous mortgage broker, saving up for a good down payment for my first home and now they are doing this???
What a slap in the face if they started “rewarding” stupidity in this way!! I agree with above poster, WORSE than socialism!
It’s not heartless. Why should people get a bailout? Well basically because we’re all going to suffer if they don’t, but yes, those of us who are sensible and have fixed rate loans etc should also be given some inducement here because sure as eggs are eggs this is simply not fair.
Finally someone states the obvious! If all the poor planners are going to get a break then I, as a good planner, want a break as well!
I understand that freezing rates on certain sub-prime loans may be necessary to help prevent a U.S. recession but it’s no guarantee that the same careless financial institutions & greedy consumers won’t land us in the same mess twenty years from now. Learn from your mistakes people!
It’s interesting that the government is willing to bail out sub-prime borrowers and in effect, keep the cost of owning a house beyond most family. If the government wants to bail these people out, then I say the government should give out free/low interest loans to non-home buyers so we can afford to buy a house also.It’s only fair
I am beginning to search for my first home. I am wondering if I should buy something I can’t afford on an ARM, and then whine alot to have my rate frozen, therefore making it affordable. Do you think this will work?
What about me?
I have a fixed mortgage because I wanted to be conservative and know what I would be paying. Now, there are no jobs here and I’m having trouble paying my mortgage as well. Should I have to pay more for my loan because I was conservative? If they want ot help, then help us all. Why should my neighbor (who works in the real estate industry) get a break on his loan payments when I have to continue to pay mine. I’ll probably just get a nice tax increase in some form or another. Never thought a person with as little disposable income as I have could be so philanthropic!
Why not just payoff their loans these people messed up so they can do it again, so all of thne not “Jones” can pay for more!!!!!!
If they do this, it will forever change the way I feel about this country. How can one possibly make financial decisions when the rules change all the time. What a chump I am. All these years of living within my means, paying through the nose with 30-year fixed rate loans. Who knew I could actually be living on the beach for what I’ve been paying.
How about fixing all ARMS at todays Fixed Rate. Forget the teaser rates. If anyone gets a teaser rate I want my great 5.125 fixed rate loan lowered also…
I say, neither a borrower nor a lender be, because you’ll both soon be bankrupt. They say you should always have a shovel for roadkill if you are starving.
This is not about bailing out Joe Homeowner who made a dumb financial decision. This is about bailing out the banks and Wall Street. The government could not care less about the homeowners.
I just wrote my Senators and Congress man saying the exact same thing… Why aren’t people beign held accountable for there actions…
When all those CEOs like Mozillo (Countrywide)and Wall Street thieves (C) surrender their outrageous bonuses of the past 3 years, then there can be some discussion of a Wall Street/Hedge Fund BAILOUT. Come next November, NOT ONE incumbent is getting my vote - I’m flushing the political toilet.
Freezing the rates for people that are unable to understand their mortgage documentation is a slap in the face for people that are intelligent and are able to pay their bills on time. This is totally unfair and should bring a wonderful court case to bare. If you want to talk about unfair practices then this is it. If you are freezing rates then it should apply to everyone that has a mortgage and we should all get a low teaser rate for our entire term even if we have fixed rates now. After all fair is fair.
I want to buy a beach house in Malibu. Will they bail me out when I can’t pay for it? Many that took ARM’s did so because it was the only way to get a house. I am against a bailout because the only ones that will be helped are the banks and real estate investors. The banks made the loans, let them take the hit. Some will have to move and rent but this will cause home prices to drop and they will be able to get into a home later for less money. Helping the rich will not help anyone else. Sorry, but I have a fixed rate loan and so should everyone else.
Everyone seems to be blaming big name retail mortgage lenders. Let’s not forget, home builders have IN-HOUSE mortgage companies as well! When I worked for home builder in the country, we were putting corrections officers in $500k+ homes in southern California. Nobody questioned anything. Now we’re asking/telling the investors of our asset-backed securities to go along with this rate freeze. Why should they? As usual, the market needs to work itself out. I can’t see the secondary mortgage market returning to any sort of normality any time soon, especially with Harry Reid and George Bush meddling where they ought not to, and with lenders trying to apply what looks like a regulatory-pleasing Band Aid.
My home payment increases 389.00 in March of 08′. Can I afford it? Yes. Thats because I planned for it, saved for it, and spent the 250.00 dollars to a lawer to explain to me what I was getting into befor signing the endless paperwork. Now my stupid ass nieghbor gets his rate frozen because he did not have a plan to pay his mortage when his new A.R.M. goes into effect. If my rate is not frozen I am taking Wells Fargo to court.
I agree completely. Why should some people who knew exactly what they were getting in to - they just thought they would be able to flip the home for a big profit - get their ratres fixed at these extremely low rates. When I who has good credit and income gets stuck paying a higher rate when my loan adjusts - I did not think I would be in the home for this long but with the way the market is I am stuck. It is not fair for people to have the benefit of the lower rates and then keep those rate when the loan was to adjust. Not fair to investors who thought they would be getting higher return and not fair to people like myself who did not try to play with the system. I amde a choice with adjustable rate mortgage and I should have to take the good with the bad.
Your piece contends that if some variable mortgage rates are to be frozen that yours should be also. After all, fair is fair. You knew what your were doing when you took out your variable and understood when closing that higher payments were in your future and that’s as it should be.
However, the real question here, which has been largely ignored by the media, is, “Were a vast majority of people scammed when they closed on their sub-prime mortgages or did the know what they were doing?”
It seems obvious that a vast majority of people who took the money to buy, at last, something they’d long coveted, their own home, were readily and easily duped by unscrupulous mortgage sellers who had to know, loan by loan, that there was no way the people they were talking to could survive down the road. In fact, as I am sure you understand, writing such mortgages was akin to taking candy from a baby.
The folks who had knowledge, who could have and should have known that these bundles were NOT triple A, should be hung out to dry. Failing that, and given their influence over politicians, they should at least be forced to unbundle and “save” all the victims of this scam. The banks holding the paper didn’t initiate the fraud…but they helped perpetuate it. They were left holding the bag…
So, their choice is to help their debtors or to take possession of what they own through default. The choice is theirs and they have to pick their poison.
I used a 200K HELOC to finance a business where I employee 50 people. (STUPID). However, whats done is done, and I sure wish someone would freeze my inerest rate so my cash flow wouldn’t fluctuate. I have had taxes go up on evey part of the business, a minumum wage increase, commodity price increases, etc, etc. Does any one care? No, yet please don’t let people who could not afford the house they bought in the first place loose them.
Heartless, maybe, but the Gov has to let the market clear itself. If they freeze the rates then houses will continue to be too expensive and people will have no choice but to get themselves into bad mortgage products to become home owners.
I don’t have any loans — can I get some free money too???
Yes, right on.
Not only will the costs of mortgages go up through through this non- free market attempt to ‘correct’ an imbalance; Inflation will be much higher as well. How else will this be paid for? Banks will need to borrow more from the Fed to do ‘real’ loans to shore up these deals.
I feel the same way as you Adam. The spin out there is that these homeowners that are in this situation were somehow led astray that their Adjustable Rate Mortgage they signed, most likely in the presence of a closer with a title company explaining the interest rate jargon, would actually adjust at some point. Nobody wants to take responsibility for their own actions anymore.
You are not being heartless, but more than likely disgusted at the entire system that seems to place more emphasis on helping those with less than stellar credit histories. You know as well I, that those that try hard to live within their means, make payments on time, etc. will be the ones paying for this!
I absolutely agree with you, except that you do not go far enough. Since the effect of freezing ARMs is to lower the interest rate by, say 2% for the next 5 years for the greedy or fools, I want the same deal on my 30-year fixed mortgage - I want it lowered from the ridiculous, outrageous rate of 5.625% that I foolishly signed up for to, say, 3.625%! Call me greedy, call me a fool - I want my rate!
… and the next BAILOUT will be to those sick people who dont actually take care of themselves and of couse
punish the healty with higher medical costs and insurance … read my lips
NO MORE BUSH!!