This entry was posted on Tuesday, April 17th, 2007 at 3:09 pm and is filed under Interest-Only, Mortgage Programs, Subprime Meltdown, mortgage rates. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
Mortgage Giants To Rescue Distressed Borrowers
In the scramble to address the difficulties of home owners trapped in bad loans, help may be on the way.
From the Associated Press today:
MORTGAGE GIANTS MAY HELP BORROWERS
WASHINGTON (AP) – The heads of Fannie Mae and Freddie Mac said Tuesday the mortgage finance giants are developing new types of loans to help distressed borrowers with high-risk mortgages keep their homes at a time of rising foreclosures.
A key federal regulator also urged lenders to step in now and extend flexible terms to struggling homeowners.
The moves by the two government-sponsored companies, the biggest buyers and guarantors of home mortgages in the country, came in response to the turmoil in the market for so-called subprime mortgages, higher-priced loans for people with tarnished credit or low incomes who are considered greater risks. In recent weeks, the distress has roiled financial markets and stoked anxiety that it could spill over into the broader economy.
The companies’ initiatives were disclosed by their chief executives at a hearing by the House Financial Services Committee.
What solutions are they contemplating?
Rumors are that Freddie Mac saw this coming and has been working on a 50 year loan with an initial 10 year interest-only period. This would certainly smooth out the ride, assuming borrowers have the equity and income to qualfiy. .
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April 17th, 2007 at 3:18 pm
The greed from everyone jumping into the housing boom over the last 5 years created artificially inflated house prices. Investors account for nearly 26-30%(maybe more if we knew the real story) of the purchasing of these subprime mortgages trying to ‘get rich quick’. The rest of the mortgages were purchased by just about everyone with the same mindset of, “I got to get in while the getting is good”.
A correction in the housing market is absolutely necessary. Home prices are beyond the affordability of the average paycheck and it’s destroying our quality of life. In some areas like San Diego, affordability runs at 8-12% of the population can afford a ‘MEDIAN’ priced home.
Investment is a risk. The problem became that there were so many wan-a-be millionaires, like your neighbor who took out an equity loan on his house to buy another, that drove the market higher and higher. I am sure they would be laughing all the way to the bank if they made the right decision. However, it was their ‘choice’. Their risk and it’s their responsibility to bear the pain of their mistakes.
Let the market fall back to a reasonable level of affordability, period.
April 17th, 2007 at 7:30 pm
Mike,
I agree with you that greed took hold. Even first time buyers had dollar signs in their eyes in the last few years. Every one had developed a short-term mentality. Flippers replaced day traders in the latest get rich quick gold rush.
When will people learn?
April 20th, 2007 at 1:58 pm
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April 21st, 2007 at 3:48 am
right now the risk to these is with wall street, but now wall street has convinced congress that the govt. should pick up the burden. that’s some pretty good lobbying.