As the world awaits the details of the Hope Now Deniallance’s plan to save the housing market (some details have leaked,) by freezing Adjustable Rate Mortgage resets, we wanted to leave everyone with a thought, and a couple of graphics.
It has become axiomatic that the foreclosure problems we face are a result of exploding and toxic ARM’s that have made mortgages unaffordable. Now take a look at this graphic (via WSJ Marketbeat & Peridot Capitalist):
Notice that of the causes in this chart, the only one that can be directly impacted by policy action is the payment adjustment. This should be a clue, though we do note that the percentage caused by adjusting payments will go up – these resets will peak early next year.
And now this, from a Boston Fed Study on Causes of Foreclosures in Massachusetts (PDF):
So, given this information, and knowing that The Plan is targeting payment adjustments on only a certain subset of subprime Adjustable Rate Mortgages, we ask, how much good will this actually do?