Mortgage rate freeze rewarding stupidity?

Question

As mortgage rates fell to lows not seen since Eisenhower was president I refinanced my mortgage. There were offers for interest only loans and adjustable rate mortgages with rates less than 3% that would have resulted in ridiculously low monthly payments but I saw the risk in those and instead took a 4.875% 15-year fixed mortgage. Now the Bush administration is brokering a deal to freeze the rates on those adjustable rate mortgages.

How is that not just rewarding people for being stupid? What's next, having the casinos and lotteries give back money to those who played and didn't win?

Since we're doing "do overs" here, how about they give me back the extra interest I paid because I was smart enough not to go for the ARMs?

Answer 1

Socialist? Rewarding stupidity? It's not socialist, a rate freeze is about rewarding and supporting and protecting the MORTGAGE UNDERWRITERS and the APPRAISERS and the BANKERS who created this mess. Stop thinking of social problems as being the fault of those at the bottom of the food chain. Why don't the banks have to take it on the chin for this? You can be assured that they will not be held responsible in any meaningful way. This rate freeze is a too-little, too-late attempt at forestalling a meltdown in U.S. real estate and banking.

Sure people who can't afford a mortgage shouldn't have one. However, these people were clearly told, for many reasons, that they could afford the mortgage--that's how they got one after all. Yet, people who can't afford them shouldn't get them, right? And who makes that decision to give them a loan, the house buyer, or the person/bank underwriting the loan?

Your schadenfreude shall be preserved, as you understand that many of these subprimes were defaulting even before the rate reset. And mortgages will be continue to be defaulted upon even if the rates are frozen. Fixed-rate default rates aren't so hot these days either, by the way.

The problem is that people are holding mortgages that they can't afford, regardless of the rate. And since the house is probably worth anywhere from 5% to 30% less than what they paid for it, and nobody will buy it, the owners just walk away from it. Can you blame them?

Recently in Bakersfield CA, a guy, David Crisp, stands accused of financial fraud related to his massive home finance and real estate scamming; read here: http://bakersfieldbubble.blogspot.com/2007/09/state-asscues-crisp-cole.html
There will be some more people like this nabbed, but the big crooks never get the justice they deserve, it seems.

It is clear to any reasonable observer that this real estate bubble rewarded crooks and greedy scamsters, not homebuyers, who are now saddled with huge debts and overvalued homes. A rate freeze won't change that.

Answer 2

The offer is only for those who's adjustments are after 1/1/08 which means they purchased after 1/1/05. Since the market peaked during the period of eligibility and has since fallen up to 30% in some areas, most peope who bought during this period is a loser no matter what kind or mortgage they have. Anyone who had no or little down payment, the best thing would be to just walk away. The "deal" is an effort to help banks by convincing people to stay with a mortgage for an amount greater than the value of their house. If they are rational about money they won't take it. Anyone who had a large down payment does not have the option.

Answer 3

I agree. I guess I should have refinanced with a sub-prime instead of having a fixed rate.

If the government truly believes that the problem is so huge that a break is needed, there is still no reason for a five-year freeze. I have compassion for people who may have lost jobs, faced unforeseen financial problems, etc. In fact, I probably would not have responded to your question had the fix been for one year. That would give people enough time to sell and find a place they can afford to live (likely as a renter).

A five-year freeze is totally absurd. It appears that the government is playing both to the masses and to the home loan industry in this election year.

I thought I was the only one who was peeved about this, but I'm glad there are others.

Answer 4

"
How is that not just rewarding people for being stupid? What's next, having the casinos and lotteries give back money to those who played and didn't win?"

When I applied for my mortgage, I applied at 20 different lenders its called "Unfair Lending". I had an excellent credit score, but every lender told me I COULD NOT get a fixed rate, That it was unavailable to me specifically, because I was 22, one place had me fax my report cards from college to try to get a fixed rate. There was a broker that consistently told me that Lenders are only going to offer me ARMs. Whenever I had asked for a fixed rate I had to jump through hoops and fax something that they knew I didn't have like 6 years of W-2's.

I don't know what to tell you except that you may be the smartest guy on the planet, and yea sure you deserve a rebate.

I got approved finally for my loan on the day of my closing, and yea, it was an ARM, I felt that I had no choice. Does that sound fair to you?

Answer 5

I think we all know that people who bought homes in the past 2-3 years with shaky lending practices shouldn't have been able to buy a home. Partially because of it, we (as a whole) has enjoyed a stronger economy, stronger job growth, and economic expansion as reflected in above 6% GDP growth since 2003 and not to mention appreciating house values (i'm sure you didn't complain about that). Now GDP growth is around 4.9% with a possibility of slowing down bellow 2% this quarter.

Now that it's payback time, with ever looming job losses, slowing economy, and continual drops in home values and not to mention increasing crime rates, we shouldn't be too happy that the sub-prime borrowers are going under. We as a whole will also suffer.

Lastly, the sub-prime borrowers probably didn't get the 3% rate for their ARM (sub-prime mostly means bad credit, so their rates would of definitely been higher than yours). So, why punish those borrowers that have been meeting their payments (and because of that increased their credit score) when they probably are paying the same 4.875% (frozen rate)?

Just for reference, I didn't buy a house during the boom because I thought like you that the prices were insane. But with the recent down turn, and 15-20% drop in new home prices, my family has finally bought a new home. We also took out a 30 year fixed loan.

Answer 6

I'm one of the stupid people. I was lied to about how it worked , and how much my home is worth. I am at 14%. After my loan started adjusting my job closed. I had been there for 12 years. I was approved for a new fixed rate but my home will not appraise for enough to pay off the loan I have. I make to much money to file bankruptcy, and not enough to pay my mortgage. If I lose my home I might as well quit my job and live on welfare. The ones that got the fixed rates would still be paying their tax money to help take care of us. Why don't you complain about that the ones living off our tax dollors? At least I go to work every and try to support my own family so you don't have to!!!!!!!!

Answer 7

Bush has to do something or the Dims will create a invoice which will fee extra and bail out extra of those fools who offered the variable fee mortgages. those bankers who offered those loans are the scum of the earth! we could desire to continually no longer be bailing out the silly sufferers or the grasping perps in this economic tragedy. Nanny state, of path that's.

Answer 8

not to worry in the long run you will still be a winner -- because these losers will turn around and figure out a way to goof up a second chance!!!

Answer 9

Isn't what Bush is doing, something Hillary would do?

Time for people to see what is really going on.

Answer 10

thank you for pointing out the government's desire to become more Socialist every day.
stupidity is rewarded every day in America.
personnal responsiblity is not rewarded.