Again, even if you freeze ARMs, a lot of the problem is that a) the PEOPLE ARE SUBPRIME! Jesus, that by definition means they have bad credit, and a lack of reliability in paying back debt. Even if they freeze rates, they will come up with some other excuse and still default. SUBPRIME BORROWERS DEFAULT ON MANY MANY THINGS, THAT IS THEIR VERY NATURE!!!!!! IT IS WHAT THEY DO, IT IS THE REASON THEY ARE SUBPRIME-THEY CANNOT BE TRUSTED WITH CREDIT IN ANY FORM. b) Many of the mortgage problems, aren't just from ARMS, many are from INTEREST ONLY PERIODS. You can freeze that, if if you did freeze the interest only period, you at some point will HAVE TO PAY BACK THE PRINCIPAL, unless you are just gonna tell the banks to write it off and give the property to the borrower for just the price of interest. Ain't gonna happen. c) the ol 1-2 combo, ARMS with INTEREST ONLY, and some with the ol rope a dope, NEGATIVE AMORTIZATION......this is where it will hit the fan. There is only so much the GUMMINT can do no matter what they take from the responsible and upstanding citizens. Game over, regardless of how long it takes for everyone to realize it. SOMEBODY SOMEWHERE IS GONNA LOSE SOME MONEY....QUESTION IS, WILL WE DEVOLVE INTO FASCISM OR COMMUNISM IN THE MEANTIME BY TRYING TO POSTPONE THE INEVITABLE??
to me subprime lending is like this: It is bad enough to have a criminal paranoid schizophrenic out on the streets. (this is the subprime crowd in my analogy). Then imagine that the schizos are given guns, knives, EXPLOSIVES, and allowed to run around and do their thing. This is essentially what the lenders did. We took subprime borrowers, which are by definition irresponsible with credit and money, and we gave them tons of money for a property and then equity loans based on their "honesty" (remember kids bad credit in and of itself indicates a lack of honesty and responsibility)......and to add fuel to that fire, the mortgages were loaded with all kinds of tricks like adjustable rates and negative amortization. WHAT THE HELL DID PEOPLE THINK WAS GONNA HAPPEN?
What about all these "top tier" firms that are forced to write down BILLIONS. Clearly they didn't have much forethought.
So, I guess you naysayers would rather have homeowners default; have the banks foreclose and take ownership, and de-value your neighborhoods by selling these properties at a loss. Me? If the note holders want to re-negotiate the terms, why should I bitch about that? It's not costing me anything, and in fact, I'll probably benefit from it. P.S. here is a link to an article that simply explains how the CMO blow-up occurred. http://themortgageinsider.net/mortgage/subprime-mortgage-meltdown-explained/
Maybe this promise will pan out like the promise to those to people in New Orleans who lived in a flood zone with no flood insurance and after Katrina the government promised they would help them out.
It will only postpone the same ending. The question is do you take the pain now or later. Well, I guess the answer is later, because there is a chance it'll go away .
I don't care what my property value is frankly. My house is great and I have absolutely no intention of EVER selling it. So yeah, let's get the pain out of the way and let the defaults start rolling in.