Why is there a foreclosure problem NOW and a solution

with indexes to which variable rate mortgages are tied falling, shouldn't the new foreclosure rate also fall?
Why doesn't the government buy a certain percentage of bad mortgages, contract ot for serving the mortgages, renogotiate the interest rates to a lower fixed rate, then sell the new;y negotiated mortgages back to the open market?

 

with indexes to which variable rate mortgages are tied falling, shouldn't the new foreclosure rate also fall?

Indexes aren't falling.

And even if they are, the bulk of these loans were tied to teaser rates (around 1% - 2% or even neg-am). When the reset kicks in, the borrowers don't have a chance.

 

Treasuries are falling. 10-year is a 3.16. When rates crated in June, 2003, treasuries were around 3.3% at the close of business with a low of 3.09%.

 

ARMs aren't tied to treasuries.

 

Check the three month TED spread.

 

No matter how fast rates crater, most ARMs don't change, either way, more than 100 basis points from the reset value, even six months to a year. Meaning that if your variable-rate loan shot up to 12-15 percent, it isn't going down any lower than 11-14%, maybe to 10-13%, in the course of a year. And that all depends on the rate the exact day of reset.

 

I still feel the foreclosure rate is tied into the wonderful package the credit card companies fought for in regard to changes in the bankruptcy law.
Without a blanket dismissal of their credit obligations, something had to give -- and it's their homes.

 

Come on, guys. Aren't we all on the same page?

The destructive crap was the option arms, with no or low teasers, and even loans with negative amortization. Most were never meant to be played out. The shysters who sold the loans said to take the teaser loans, then when your credit is better, refinance with a more stable loan. The wink-wink was that the house value would continue to increase.

The resets, are HUGE, in part because the home values have plummeted.

 

And foreclosures are up because housing prices have plummeted and people with $500k loans on houses now worth $350k are walking away.

Have you guys been watching the news?

 

This whole thread reads the way the adults in the Peanuts TV cartoons sound.

 

It seems to me that at least some of the foreclosure problems could easily be solved if the government simply required the banks to lock Adjustable-rate mortgage back at the original rates.
For example, If you had a 6.5% loan that ballooned to 13% -- just lock it back at 6.5.
The banks would still make money, and the borrowers could still afford the payments. So what if the banks don't get the increased profits. They would at least be paied back.

 

Wahh, wahh, wahh, wahwahwah