California lenders agree to freeze rates In an unprecedented move designed to save thousands of California homeowners from foreclosure, Gov. Arnold Schwarzenegger announced a deal Tuesday with four mortgage lenders to freeze adjustable interest rates for some of the state's highest-risk borrowers. The state's agreement with Countrywide Financial Corp., GMAC Mortgage, Litton Loan Servicing and HomeEq Servicing covers more than 25 percent of California's subprime mortgage loans, which generally involve homebuyers with weak credit and require periodic increases in payments after initial low-teaser rates. The deal brokered by Schwarzenegger requires lenders to freeze low interest rates for subprime homeowners who reside in their property. "To lose your home, as probably everyone knows, through a foreclosure is an emotional crash and it sometimes takes years to recuperate from," Schwarzenegger said. "But we don't have to sit idly by to watch the American Dream become the American Nightmare." Read more in Wednesday's Bee. ---------------- I wonder what was in the deal and how long its going to last.
Arnold's been great, my state -- California -- loves him. The Republican Party can learn a lot from him, and if they followed his lead on positions they would regain their popularity with the people. Arnold is one of the few Republicans that actually live in the present and the future, instead of the dwelling in the past.
Great, another bailout for idiots who didn't understand that buying a $800,000 house on a $50,000 a year salary with no money down was a bad idea. Oh wait, I forgot....the mortgage broker "tricked them into signing". More help for the reckless...what a surprise.
Why exactly? Seems a win/win at face value anyway. The homeowner keeps his home and avoids a hike that forces him out, and the holder of the debt doesn't lose money foreclosing on the house. If they raise the rate on the ARM, buyer is out and lender loses at least 20% since market value is at least that bad.
I fucking hate bailouts. It's fucking with the free market. Now Real Estate economics is all fucked up. What should have happened is mass foreclosures on idiots who took out mortgages they obviously could not afford. The banks who bought these mortgages would be hit hard by losses. These homes would then hit the market after a significant price reduction and would then sell at prices normal people could afford. This would give a reality check on other homes selling at inflated values. But these recent actions by the Terminator... all this does is add futher upwards pressure on homes people cannot afford. Idiots can take out negative amortization mortgages and banks will be free to lend to anyone knowing that the government will step in if losses are possible. People who saved 20% to use as a downpayment are the biggest losers. They could have bought a new home with 0 down with 110% mortgage and get $10,000 back in free money! The home would have trippled in value, and they could have sold it to some other idiot. Whom in return would have bought it with 0 down and repeat process to defraud the bank of money and run up RE prices in the process.
Its a loss for all taxpayers. Someone owns the mortgage and wants payment on the specified terms. The government making these loans whole will just increase taxes on its people through bailouts. Its a lose/lose. Fiscal prudence is being thrown out the window to help the idiots who got in over their heads.
The deal makes perfect sense and thats why the lenders agreed. Its in essence a refinancing without having to go through all the extra steps and fees. Virtually anything is better than having to foreclose on a property.