Subprime Bailout In The Works
According to an article in this morning’s Wall Street Journal, the Treasury Department is close to a deal with a coalition of major U.S. lenders known as the Hope Now Alliance that would freeze—for the time being—interest rate levels on some subprime loans. While details are scant, under one version of the plan, introductory “teaser”…
According to an article in this morning’s Wall Street Journal, the Treasury Department is close to a deal with a coalition of major U.S. lenders known as the Hope Now Alliance that would freeze—for the time being—interest rate levels on some subprime loans. While details are scant, under one version of the plan, introductory “teaser” rates could get extended for some peope for up to seven years. Members of the coalition include such heavy hitters as Citigroup, Wells Fargo, Washington Mutual and Countrywide Financial as well as a number of so-called mortgage service companies. The one group of stakeholders that’s been less enthusiastic is the investor community, but The Journal reports that investors are coming around to the idea that “it’s better to get some interest than none at all.” Do you think this is the right thing to do? Do you think this kind of bail out risks creating a moral hazard that could lead people to make the same mistakes next time around?
U.S., Banks Near A Plan to Freeze Subprime Rates [WSJ]
Photo by Meghann Marco
I did not know that the piper even had a Joshua tree.
Dearest What,
In your moment of perceived triumph it is more important than ever to watch your grammar & the mechanics of writing.
“Uh-OH. This deal could DESTROY “The What’s” dreams!”
Oh no! This make thing worse! If you modify any Mortgage, the Mortgage holders of this world will dump US debt on the open market. This dry up credit and make things worse. The most fuck up words are” I’m am from the government and I’m here to help.” Tax payers will have to SUCK this up for years to come. I’m laughing my ass off! When housing prices was going you, All of you was smug, arrogant and thought you kings of the world. Now the piper wants his money back and he has a ‘Joshua Tree’ with him. This the END-GAME of this Mutant Real Estate Bubble and we will be fucked for years to come. IT”S OVER DUMBASSES!
The What
Someday this war is gonna end….
Note: I’m glad that some you are getting it! Props to Gabby
The vast amount of foreclosures in this city are not by people buying mansions in Westchester with South Bronx incomes, they are middle income people buying modest homes, a lot of them new construction, in places like Bushwick and East New York. I’m sure much of the rest of the nation is similar. While lenders should not have signed some of these people up, and many of them should have been much more careful, the fact of the matter is that they did, and here we are.
Bailing out the lenders does not make me happy, especially since the real sufferers on their ends are the grunts in these businesses, not the high paid managements. The money has been made in the stock market, the portfolios got theirs, and got out, and a lot of people got rich(er) off of this. They will not be paying. it’s the poor schlub on Jefferson Street in Bushwick who honestly thought he could afford his new “affordable housing” house.
He was told he made enough money, he was told his monthly mortgage was $XX, and he was overjoyed to join the ranks, and get the perks from owning a piece of the American Dream. He was also probably told he didn’t need a lawyer to close, or that the lender would provide him with one, or he didn’t read the small print that said his rate was only good for a year, and that it would then double.
The human face on mass foreclosure makes 11:16’s tough love remedy not acceptable to me. Find ways to punish those who knew they were profiting from borrower’s ignorance and didn’t care. Find ways to allow people to keep their homes while paying rates they can afford. Empty homes bringing neighborhoods down, while families become homeless or crowd into substandard conditions, which does no one any good. Displaced and dispondant people can’t work efficiently, and then become more of a burden on the system, through welfare, medical costs, food stamps, and perhaps the criminal justice system. This is not the way to make people “pay attention and be more responsible.”
Actually there is no monetary bailout mentioned in the WSJ article. The idea is to get the big lenders to decide to do something collectively on their own, like extend their introductory teaser rates for up to 7 years. And then they’ve got to get the investors to accept this deal as well, plus they need to decide who gets the benefit of this action. It would probably mean that many people could keep their homes, at least for the time being.
But the government is certainly in no position to be lecturing the banks on financial solvency – that’s like a smoker telling someone else to watch their cholesterol.
This is not a bail out. Very bad reporting MR B. These are loan modifications. Lenders will modify if they think they can get more by having the borrower continue to pay pricipal and a lower interest rate than contractually allowed then by foreclosing. which is very expensive and selling a home where the mortgage balance is greater than the market price. They are only allowed to do this if they believe it will lead to higher recoveries than a foreclosure, otherwise investors could sue. This is a free market program not a bailout.
I am not sure where people are getting the idea that this is a bailout of the banks or mortgage lenders – seems to me this is strictly a bailout of borrowers (i.e. homeowners)?
Anyone care to explain thier outrage
Sickening.
Those of us who saved our money and didn’t buy because prices were crazy despite easy mortgage conditions are the ones who suffer by bullshit government bailouts that prevent foreclosures and the normal downward adjustment of real estate prices after a hyper real estate frenzy like this one.
Life isn’t fair.
Louis
Last I read, Cheney was adamantly opposed to a bailout, the first thing I’ve ever agreed with the man on.
I don’t think it’s about ‘making the spiteful happy,’ it’s more about the lenders actually being held accountable for their mistakes.
Mass foreclosures will benefit a housing market that’s incredibly over inflated, and ultimately make people (both borrowers and lenders) pay more attention and be more responsible with their money, which will pay off more in the long run than a gov’t band aid.