Banks, U.S. near deal on subprime mortgages

[MidnightVoice]

http://www.msnbc.msn.com/id/22039594/

The Bush administration is working with industry on a plan to extend lower, introductory interest rates on home loans before they reset at higher levels.

The talks come amid hints from Federal Reserve Chairman Ben Bernanke of another cut in a key interest rate to keep the economy from sliding into a recession.

Treasury Secretary Henry Paulson and other top regulators met Thursday with loan servicing companies — firms that collect and distribute loan payments — and other industry executives. No formal agreement was announced, but an accord on this issue could be revealed in the next week or two.

[Anonymous]

http://online.wsj.com/article/SB119638615868608863.html?mod=hps_us_whats_news

I was just about to come post the link above on the same subject.  IMHO this is horse pucky!!!  Whats next?  Will they start bailing out thos ewho have subprime credit cards?  I just do not believe that this is an issue for the goverment to get involved in.  The loans were subprime for a reason and now you will have people getting over fat who should have just waited until thier credit improved before purchasing homes. The least that should have been done is that they should have had to go through a credit rehabilitation program like the one we have here.  Give me a break!!!  So someone eho doesn't know enough to read the T&Cs will now probably have a better mortgagerate than I do when I worked very hard to bring my credit up to snuff before applying.

Call me SCROOGE!!!

[Anonymous]

I agree. This is not a crisis, but rather a correction. It should be allowed to run its course...if it isn't, the imbalances that led up to it will find another, still more painful way to manifest themselves.

[Anonymous]

My feelngs on the issue are this:

1. These customers knew they had the loans they did because of mistkes in their credit past.  I was offered one before I started credit repair and knew not to get myself into it.

2. The ARM usually adjusted after 5 years. 

3. Did it not occur to anyone to clean up their acts before this thing adjusted?

4. I had a broker try to sucker me into one of these BUT he also advised that I could refinance, when the ARM matured.  My answer was no because I couldn't afford he payments on what I was making and I wasn't buying a house on a wish.

5.  If you know you are going to have to refinance in 5 years or you're gonna get shafted, why not try to clean up your mess that got you there?

6. Did no one have an attorney representing them at closing?

7. Did it not occur to anyone to make mor than the required payment to hack off some of the principal BEFORE the thing adjusted, knowing the payment would triple at the projected adjustment. 

Let it play out is my opinion.  Even a piggy back loan after 5 could have gotten some people out of this ess had they bothered to clean upthe mess they were in in the 5 years they had.    Another case of the government trying to regulate common sense.  But on AHA they are trying to prevent downpayment assistance which could pobably prevent a lot of this mess.  Like the freaking Keystone cops!!!!

Message Edited by Brammy on 12-01-2007 08:01 PM

[Anonymous]

......and of course banks will have to make up the lack of these projected profits in other areas.  Can you say fee increase?  Interest rate increases on credit card borrowers for business needs.  So congress is now trying to make sure that the banks gives credit card borrowers 45 days notice before hiking interest rates....hmmmmm.  Lets see, you have a balance bigger than you can afford to pay in that 45 days.  You get a notice.  Since everyone is attempting to compensate for business needsthere's no viable BT offers avail.  So you either suck it up on Ramen and break open your piggy bank or you close the account in order to keep your current interest rate and wonk up your credit profile with a balance showing on a closed account.  Decisions, decisions......

[Anonymous]

I don't agree with any of you and I think there is a bit of selfishness involved in some of the comments above. 1. The government is only involved to the extent that they got the concerned parties together and offered a plan or potential solution to the problem. 2. The government is not bailing out the lenders, investors or owners. 3. The lenders, investors have a choice of not going along with this plan but they know that that would be cutting of their noses to spite their face. I as an investor would rather receive some income and still have claims to an asset as opposed to no income and the burden of owning and maintaining an unoccupied property. 3.I believe that the lenders along with the builders/brokers share most of the blame. Many of you hear erroneously focus most of the blame on the owner. If I have a toothache, I go to a dentist and expect him/her to use the tools of their trade i.e xray etc and their knowledge to let me know which tooth is giving me problem and provide me with the options to correct it i.e removal by extraction, root canal, filling etc. By the very same token, If I'm a buyer, I go to a broker or lender have them pull my credit and provide them with financial documentation and they lay out my options to me. They have the power to deny me or reccommend a specific product or many products. Even if the buyer is ambitious and chooses the exotic ARM, the lender still has control to say NO which clearly many of them still approved. So to that extent, most of this blame lies clearly with the mortgage brokers and banks. 6. Many of you presume that many people like us on this board are savvy, unfortunately, many everyday folks are not and rely too much on the broker, lender. They trust them more than they should. In additon, I know of many savvy folks who were told that they had one product all along and then on settlement day, switched to a less desireable product last minute. 7. I as a citizen would rather see this plan implemented rather than have the market correct itself as someone wrote by allowing foreclosures to take place. The reason being, we all live in communities and here in Florida, despite what the inherent assumptions are by some posters, many of the foreclosures are taking place in middle and upper class areas. This is having an impact on communities here and in places like Ohio and other places, it's having a devastating affect. Here, we are starting to see thieves vandalize homes for the copper, pools not cleaned attracting mosquitoes and other insects, overgrown grass etc. This attracts crime and brings down the value of other properties. 7. I think more should be done as this doesn't address the loans that are behind. I think that it should also cover loans that are no more than 60 days behind. 8. I have a fixed loan at 51/2%- no dog in this fight but i've seen decent people who make decent wages and have NOt gotten over their heads in terms of homes but because a combination of an interest rate hike and health or short term down fall in luck, lose their homes or on the potential of losing their homes. 9. The builders also have a LArge responsibility in this as they were clearly greedy and continued to raise prices to which corrupt appraisers continued to appraise at their new prices. 10. Bottom line if this country slides into a recession which I believe that it is at the cusp, it affects everyone and not in a good way.

[Anonymous]

This issue really isn't about what we all want or desire, but rather economic reality. When government intervenes in matters of market imbalances, the results are almost always worse than the original imbalance. Such imbalances exist for a reason, and unless the reasons themselves are dealt with, the disequilibrium will manifest itself in another way.

A previous post mentioned how builders were overcharging for homes and running the price up...which is half of the truth. The other half, of course, is people were foolishly willing to pay those obviously inflated prices rather than using reason and realizing that the price of a commodity like housing couldn't keep rising at two to three times the rate of wages for long, and waiting for the inevitable correction.

The current housing crash is nothing more than the market's "punishment" for those who engaged in the irresponsible behaviors in the first place. The borrowers who got much larger mortgages than they could afford are being punished by losing their homes. The builders who jacked up prices year-after-year are being punished by a three-to-five year stint in Pricing Hell, where they will be lucky to get even half of what they were getting before.

What we need to do is allow the market to impose discipline on the people who caused this imbalance. Yes, the market coming back into equilibrium may lead to a recession. Recessions are the market's way of rebalancing prices at sustainable, economically sound levels.

[Anonymous]

I do understand your thoughts on this tiburones5 BUT, and this is my issue. This is still a matter of the government regulating common sense.  If you truly believe that no money will change hands, I believe you are wrong.  Banks had the opportunity to do what was necessary long before the government stepped in.

The thing is, most of the holders of these notes are not the ones who originally initiated them.  Most of these were sold in lots to other holding groups with the promise of big money.  This promise was projected in the earnings for these companies.

Do you really think that banks won't try to make up the shortfall in some other way?  Do you really think that people not involved in this mess should really have to pay for the greed, and that is what it was, on the part of both the buyers and the FIs?

Whether savvy or not, momma always told me to read every line before signing.  When I was offered a similar mortgage, I was not savvy, that has come with research in the past couple of years.  I still had enough sense to say no. Is it everyone else's responsibility that these few didn't?  I have a friend that is in the process of closing on a home, she says basically the same thing you do, she doesn't understand what they heck they are saying.  My advice, get a lawyer.  Only a fool would go to Germany, not knowing the language without an interpreter of some sort.

Owning a home is not only one of the biggest investments a person will probably ever make, but also one of the biggest responsibilities.  You don't go about it like picking out curtains at Wally World. Hopefully this is a lesson learned, the problem is, that with the bailout, or ease up, how many people are going to learn this lesson?  Moreover, how many borrowers from now til the future will have to pay the price for it.

As far as the foreclosures in middle class neighborhoods, that seems to be an issue of buying more home than you can afford.  I have always known that when you own, every morning you look in the mirror, you are looking at the landlord.  So you NEVER max out on a house.

[Anonymous]

I think we consider too much the good luck of the early bird and not enough the bad luck of the early worm.
-- FDR

[Anonymous]

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@Anonymous wrote:

Do you really think that banks won't try to make up the shortfall in some other way? Do you really think that people not involved in this mess should really have to pay for the greed, and that is what it was, on the part of both the buyers and the FIs?

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This is straight from Econ 1A...a course apparently many politicians (and the public who elected them) slept through.

Interest rates represent the cost of money. When you get a loan for a diamond ring, a car, or a home, you are renting someone else's money. The interest rate is the price you pay. It's no different in principle than when you pay $3.50 to rent a DVD for two nights.

Freezing interest rates on adjustable rate mortgages is a form of price control. It's no different than if the government passed a law that froze gas or wheat prices. We've seen price controls in effect very recently...in Zimbabwe. And what happens when the price of a commodity is frozen below the natural market rate is that vendors simply stop bringing it to market. If the government freezes gasoline prices at $3 a gallon, and oil spikes to the point that it costs oil companies $3.50 to bring a gallon of gasoline to the market, you're going to see "No Gas" signs on gas stations. (Nixon did that in the Seventies during the first oil crisis, and that's exactly what happened!)

The results of the mortgage freeze are going to be that mortgages will be a lot harder to get in the future...especially adjustable-rate mortgages.