To be quite honest i think the borrower holds a lot more responsibility than you acknowledge. You never even mentioned them for their sheer stupidity. They took out mortages to property they could not afford to keep up with the Jones's thinking the real estate market would bail them out. These folks should have never got loans, and only got them due to the Fair Housing lending act of 1977 and strengthened in 1998. The banks wanted no part of lending to these folks who were not worthy candidates for mortgages in the first place. The banks are forced by the DOJ to do these stupid transactions and since they have bad scores or other hindrances the banks must charge higher interest. So do not only blame banks, although i have audited some biggies and thought their default models were extremely low. Blame Liberal idealism for most of this, their is a reason these folks could not borrow conventional, they were horrible risks. Your pay model should be around 30% for occupancy and if you pay more, even much more in some cases you should never have moved in. Any time i have bought property in the past i always consult a knowledgable attorney just to catch something i may not. If these borrowers could not afford $350 per hour to understand resets etc, they darn sure had no business buying a house. They are way more than half responsible for this mess.
Dan
of TX
@
Nov 04, 2008 13:27:23 PM
Lower Rates
This is a no brainer. Right now, if banks lowered the 30 year interest rate to say 5.0%, EVERY home owner would refinance. That does not mean that screening would now stop based upon ability to pay, credit rating, etc. But it does mean billions of dollars moving in our economy - through the lenders, to the economy from the savings home owners would see monthly, to jobs that the stimulation would create.
The other win is that people on the edge that are in foreclosure would now be able to afford the home which would SAVE the banks money. Another win would be the closing fees that lenders would get up front. Also, no one holds on to their house for 30 years these days, so the banks would not lose with the lower rate; it would be "recouped" on the next purchase when the economy is back up. The only way we will get out of this housing crisis (which affects every segment in our ecomony) is for the banks to start thinking how to supply a competative product the way the market is supposed to work, and quit thinking of ways to milk more blood from a stone.
Steve from Michigan
of MI
@
Oct 30, 2008 16:05:35 PM
Lower Rates
I think that this article negates the important fact of the effect of the interest rates on loan risk. If the interest rate is lower on a loan, the borrower will have an easier time paying it back. This is the reason we have so many home foreclosures - when an adjustable rate mortgage goes up and the homeowner can no longer pay, they default.
On the other side, lower rates gives the banks a higher assurance that borrowers will pay back the loan because it will be easier for them too. With this in mind, the lower rates will help unfreeze spending because banks will be at lower risk when they give loans.
If banks aren't lending money, they are losing it, and with lower rates on loans, everybody will start to "feel" it.
Nathan T
of WA
@
Oct 30, 2008 12:47:01 PM
Does anyone know that some people are bank DEPOSITORS as opposed to bank borrowers?
They, the depositors (probably your parents or grandparents), "FEEL" the cut as the rates on their CD's go down to pad the profit margin of corporations. How could some idiot write this article without even touching on the depositor side of the issue?
of
@
Oct 30, 2008 11:31:52 AM
Please Be Honest!!!
This article completely negates the fact that lenders are compensating for their losses with higher interest rates and fees. America must face facts that lenders do not lose money if they can help it not even due to their own negligence and mis-management. Our financial meltdown has been largely the fault of lenders failing to regulate themselves and now that collapse has occurred, the average citizen is having to pay dearly for the sins of the lenders. Nobody ever claimed life was fair but at least in the past it wasn't largely criminal but now it has become criminal and fraudulent. We will not regain stability until we first reregulate, refi bad loans and rectify our huge debt load by paying it off. The average citizen should simply save all they can after paying off debt. Please be honest however and add LOSS RECOVERY as the number 1 reason consumers will not feel any rate cut!!!
Kimberly Palmer, senior editor for U.S. News & World Report, writes about how to save money, avoid scams, manage debt, and be a savvy shopper. Send your personal finance questions to her for expert money advice.
Dan of TX @ Nov 04, 2008 13:27:23 PM
Steve from Michigan of MI @ Oct 30, 2008 16:05:35 PM
Nathan T of WA @ Oct 30, 2008 12:47:01 PM
of @ Oct 30, 2008 11:31:52 AM
Ray Fisher of NM @ Oct 30, 2008 11:02:56 AM
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