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Thread: Bush to freeze subprime mortgage rate

  1. #1

    Bush to freeze subprime mortgage rate

    CNN.com


    Bush to unveil plan to help homeowners

    The plan will freeze certain subprime mortgages for 5 years, a compromise hammered out with mortgage lenders and banking regulators.

    December 6 2007: 3:52 AM EST
    WASHINGTON (AP) -- The Bush administration has come up with a plan to help strapped homeowners facing a daunting jump in their monthly mortgage payments.
    The proposal, reached in negotiations led by Treasury Secretary Henry Paulson with the mortgage industry, would freeze introductory "teaser" rates on subprime mortgages, preventing them from resetting to higher rates for five years.
    President Bush, who is scheduled to announce the agreement after a meeting with industry leaders at the White House on Thursday, has stressed that the deal is not a bailout because no government money is involved.
    The effort is aimed at stemming a threatened wave of foreclosures in coming years as 2 million subprime mortgages - home loans provided to borrowers with spotty credit histories - reset from their introductory rates of around 7 to 8 percent to levels as high as 11 percent, adding hundreds of dollars to the typical monthly payment.
    The mortgage companies will offer to freeze the loans at the lower introductory rates as long as the borrowers did not miss any payments at the lower rate.

    More info here.
    Daniel

  2. #2
    Senior Member Foolish Old's Avatar
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    Time will tell, and the devil is always in the details...but this appears to be the first smart and positive thing that this President has done for the American people.

    Credit where credit is due.
    Foolish

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  3. #3
    Not a good idea. But coming from our brilliant president, this does not surprise me.
    No one ever became unsuccessful by helping others out

  4. #4
    Senior Member Foolish Old's Avatar
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    Quote Originally Posted by Tufelhunden
    Not a good idea. But coming from our brilliant president, this does not surprise me.
    I'm reacting only to the headline. I do think that something must be done to prevent massive foreclosures on properties used as primary residences, even if it is a band-aid approach.

    Would you please elaborate on why this is a bad idea?
    Foolish

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  5. #5
    I suppose it's a great idea to reward those who borrowed irresponsibly and bought more house than they can afford. Honesty is optional. Buy more than you can afford, because, hey, the government will force someone else to pay for it. And yes, I suppose, in America, there is such thing as a free lunch.
    Daniel

  6. #6
    Senior Member Foolish Old's Avatar
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    Quote Originally Posted by dan_nc
    I suppose it's a great idea to reward those who borrowed irresponsibly and bought more house than they can afford. Honesty is optional. Buy more than you can afford, because, hey, the government will force someone else to pay for it. And yes, I suppose, in America, there is such thing as a free lunch.
    Like most generalizations, this one falls short. The wild speculation in real estate, as investors fled the stock market after the dot.com bubble burst and poured money into real property investments, forced families seeking a place to live to compete with flippers and those wanting vacation homes. The price of an entry level home soon exceeded the ability of many hard working families to obtain a conventional mortgage. Predatory lenders took advantage of this situation, sometimes by deceit as to the true terms and ramifications of "creative" loans. Many buyers were assured that rising home values would provide sufficient equity to qualify for re-financing with a conventional mortgage before the rate increase of their ARM kicked in. Even those who knew better had little choice but to bear the risk if they needed a place to live.

    I see no upside to putting these home buyers on the street. The government often intervenes in the supposedly "free market". Helping families maintain their primary residences is one of the more benign reasons for exerting government influence in this arena. If lending had been better regulated, we wouldn't be having this conversation. Better late than never for the government to help homeowners.

    Do you think that taxpayers will not bear the cost of default if no intervention is taken? The real question is, who is going to take the hit on this deal? My guess is it will be naive investors who were sold mortgage backed securities. We shall soon see who Bush is trying to protect from pain.
    Foolish

    "We have met the enemy and he is us."-POGO.

    "I have great faith in fools; self-confidence my friends call it."~Edgar Allan Poe

    "Dream big, you might never wake up!"- Snoop Dogg

  7. #7
    I generally don't get involved in political discussions. This is another of a long line of too little, too late by this administration. President Bush and his policy advisors are collectively the biggest failure(s) to run this country (into the ground) over the last 40 years. This will only possibly assist 10-12% of affected individuals. This plan is known as the "teaser freezer".

    Does anyone really believe the administration didn't see this coming years ago? They changed the bankruptcy laws, all the while the politicians were undoubtedly receiving, contributions / kickbacks from the unscrupulous operators who screwed the "sheep" that chased real estate prices up the hill. Sheep go to slaughter.

    Now Bush says no bail out. While Greenspan mumbles in his applesauce, during his current book tour. I can assure you that anything our federal government gets involved in, it's a virtual certainty they will screw it up.

    The fall out: As a country, we are buried up to our eyeballs in debt. A majority of consumers are deeply in debt with real estate that is rumored to back and fill to 2002 price levels. Foreign investors will be scooping up our prime real estate at bargain discount pricing. Within a few years the U.S. Dollar will be replaced as the benchmark on the world currency market.

    I firmly believe that if there was any legal way President Bush could get re-elected for four more years, he could completely finish this country off. President Bush makes me think of Stevie Wonder behind the steering wheel.

  8. #8
    nicely summed chasb. lol
    oh well

  9. #9
    Senior Member Foolish Old's Avatar
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    Quote Originally Posted by chasb
    I generally don't get involved in political discussions. This is another of a long line of too little, too late by this administration. President Bush and his policy advisors are collectively the biggest failure(s) to run this country (into the ground) over the last 40 years. This will only possibly assist 10-12% of affected individuals. This plan is known as the "teaser freezer".

    Does anyone really believe the administration didn't see this coming years ago? They changed the bankruptcy laws, all the while the politicians were undoubtedly receiving, contributions / kickbacks from the unscrupulous operators who screwed the "sheep" that chased real estate prices up the hill. Sheep go to slaughter.

    Now Bush says no bail out. While Greenspan mumbles in his applesauce, during his current book tour. I can assure you that anything our federal government gets involved in, it's a virtual certainty they will screw it up.

    The fall out: As a country, we are buried up to our eyeballs in debt. A majority of consumers are deeply in debt with real estate that is rumored to back and fill to 2002 price levels. Foreign investors will be scooping up our prime real estate at bargain discount pricing. Within a few years the U.S. Dollar will be replaced as the benchmark on the world currency market.

    I firmly believe that if there was any legal way President Bush could get re-elected for four more years, he could completely finish this country off. President Bush makes me think of Stevie Wonder behind the steering wheel.
    Unfortunately, I agree with everything you wrote. However, wringing our hands and beating our breast won't save us. We are all the sheep that will go to slaughter if the defaults street large numbers of families. There may not be a way to soften the beating we have coming, but I sure would like to see some one try. I don't care who gets the credit. In fact, I hope Bush becomes famous for shocking the world by acting as if he had a brain and cared about America during the remainder of his term in the White House. I also hope we are all cured before the next election. I think the odds of either of those things happening are pretty similar, but I love pleasant surprises.

    Any practical solutions to the housing crisis to offer?
    Foolish

    "We have met the enemy and he is us."-POGO.

    "I have great faith in fools; self-confidence my friends call it."~Edgar Allan Poe

    "Dream big, you might never wake up!"- Snoop Dogg

  10. #10
    The Problem is, the snowball is already rolling downhill. What's going to happen is known as the pendulum swing.

    The weakest "hands" in any down financial market inevitably get flushed out. It's best to get it over with quickly. Although, I'm sure this administration will try to delay the inevitable, so they don't get creamed in the upcoming elections. This is going to be a problem, as what's best for the re-election effort, is not what's best for the strength of the market.

    If the financial institutions and lenders take more huge losses, the stock market drops, and the available funds to loan drop, due to loan reserve restrictions. Then the government will be forced to lower interest rates, setting up for inflation.

    The government also needs to stop the foreign speculators from buying the real estate. Maybe institute a "luxury tax" for non U.S. citizens buying real estate for a 5 year period, institute this immediately. This should act as shark repellent.

    Either way it's going to take 4-5 years to sort this mess out. A portion of the middle class is going to change from one perception to another, the rich or the poor.

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