The mortgage industry is working with the Treasury Department to work out a plan that is supposed to benefit those with adjustable rate mortgages. Unfortunately, despite all the lip service paid to the benefits of the plan, it may only delay the inevitable. And some may not benefit at all. Reuters reports the following about some of the kinks in the mortgage industry plan:
"You might end up benefiting borrowers who are perfectly
capable of making payments," said Ajay Rajadhyaksha, head of
fixed-income strategy at Barclays Capital in New York. "I’d be
surprised if every investor out there agreed to give servicers
carte blanche" to freeze interest rates, he said.
And, as is pointed out over at Behind the Mortgage, all may not be well for those who do qualify for the rate freeze. Why? Because the plan mainly calls for an extension of the teaser rates on the adjustable rate mortgages that are the problem. This means that in five to seven more years, many people will be in the same positions they are in now.
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I think its a win, win, situation for all involved as well as the economy. Freezing and/or other options to this mortgage fiasco will buy folks time to rethink their situation. Many may actually be able to sell in an improved economy a bit later, break even and/or cut some loss without a foreclosure on record. While others may have a bit more time to find refi options. Community service groups can focus on helping subprimer's with their future options. I believe many subprime owners would surely welcome a safe and secure way of getting out all together. They may feel renting is better than owning afterall, because of all the other expense that comes along with homeownership. But again, doing something now to help the economy as well as subprimers is better than doing nothing at all. I truly think we will all benefit in long run.
Posted by: Gilbert Tirado | December 4th, 2007 5:09 pm |
You make some good points Gilbert! After all, a little more time can help people. Of course, many people just continue on the same, and this just puts off the inevitable while helping the mortgage industry squeeze a few more dollars out.
The other problem is that early reports point out that some people who do need help won't get it because investors won't want them to, so it might just be so much more regulation.
A real fix would be a fundamental change in the way the mortgage industry does business.
Posted by: Miranda | December 4th, 2007 5:24 pm |