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Government looking to step into subprime problem

Can I be honest here? U.S., Banks Near A Plan to Freeze Subprime Rates I'm not sure I like the idea of the government and mortgage servicers freezing rates on ARM's to save homes. Sound mean? I'm not really, I may actually benefit from this specific govermentment interference, since I own homes that I use for rentals on sub prime mortgages.

But, the truth is that more work should be done on refinancing, the rates are less than 6% right now. More work should be done to encourage servicers to change rate adjust to fxed on their own. But a massive government program? Not sure that sounds like a very good idea.

Posted by Steve Dalton - Northwest Indiana Mortgages on 12/01/2007 10:53 PM

Comments (12)

mortgage, sub prime, housing market

12 Comments on Government looking to step into subprime problem

DEC

2007

Even if you freeze the rate for another 2 years like is being proposed all you do is slow down the REO's and put todays market out for 2 years. Then again maybe it would stabalize the market enough to let people refi out of their loans. I have many clients that would refi if the appraisal would come in.

Keep Government out of this. The market HAS to decide how this plays out and if it is not allowed to then the situation will continue.

DEC

2007

Simon, I am with you, the market is very efficient. It found a problem in the valuation of bond deals with sub prime mortgages, it corrected, and now it's time to let it run it's way out.

Joseph, I too wondered aloud about some government action to calm everyone's nerves, now I think I'd just like to see the government leaders remind people to get back in the market, and stay out of financial manipulations.

Wouldn't this just postpone the inevitable?

I suggest that the government stay out of it & let the market run its course now & be done with it.

Steve- I believe this is as much for the lenders to slow foreclosures as it is for homeowners.

Mark,

I think you're right. The government has no right to step in a bail out the bond holders. If the bond holders of these sub prime loan (collateralized mortgage obligations) want to encourage their servicers to make rate modifications for customers ... let them do so on their own. It would be like a group of stockholders asking the government to give them cash for a failing company ... instead of throwing out the board of directors and reorganizing the company they own.

Brenda, the inevitable may have run much of its course already. Sure the investor deals will foreclose at a greater percentage than normal, because the lenders don't want to refinance any of them. So the investors will in many cases let the lenders take the properties and dump them in the market. This was the risk inherent in making so many investor loans. Don't assume for a minute though that the lenders are all done making investor loans, they want those returns. I bet, and this is my gut, that even with high foreclosure rates, the rate of return on investor deals will still be positive.

Who gets hurt? In states where property taxes are based on property values, the local government entities will get less cash in 2008 due to some slippage in over-priced investor properties. But even that doesn't upset me much. I'd like to see some municipal entities cut, no not just slow spending, but actually cut spending.

DEC

2007

Steve, I'm always in to less government not more. They need to keep their noses out of things; that's all we need is another massive government program.

DEC

2007

Marchel, I totally agree. What sounds like a "caring" government program today, can quickly turn into a giant bureucracy in a hurry

Steve - i got 2 phone calls today from clients that heard that their arm was not going to adjust anymore. A paper, slam dunk clients................ the media hype is killing our business!

DEC

2007

Lewis, I wondered about that. So the client hears on the radio or television that ARM's won't be adjusting, sure they don't listen to the part about the restrictions placed on this program. The whole point of many of the sub-prime loans that I took part in, was to get somone into their house, then wait a year or two and get them refinanced to a conforming product. Now, these people run the risk of staying put and not finishing the original goal.

Right when rates drop to three year lows!

Steve- I don't like it either and have some real misgivings about the whole idea.. i suspect there is more here then possible meets the eye.. Broker Bryant noted that the idea of 5 years was ridiculous

DEC

2007

Kaye, I just don't like the feel of it. Big Brother steps in to fix everything. "Trust us everyone we're here to help." Classic lines used when government steps in to take over and regulate and step all over a market that is already well into correcting itself.

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