More on the Hope Now Deniallance: Sorting them Out

by Alex Stenback on December 3, 2007

Perhaps the most useful and succinct description of the Sub-Prime ARM Freeze we’ve seen, from Calculated Risk:

[Treasury Secretary] Paulson clearly defined the group of borrowers that are being targeted for modifications: Homeowners with "steady incomes and relatively clean payment histories who could afford the lower introductory mortgage rate but cannot afford the higher adjusted rate".

Whenever the freeze ends, most of the homeowners in the defined group will still face foreclosure. So the purpose of this plan is clear – since the industry lacks the infrastructure to handle the work load, this guideline helps decide which loans to foreclose on now, and which loans to foreclose on later.

Emphasis ours.  Sounding less like a rescue and "keeping the dream alive" and all that, isn’t it?

{ 2 comments… read them below or add one }

John Hoff December 3, 2007 at 5:59 pm

The folks who got these mortgages had dings in their credit to begin with. I bet the criteria for this new help will be so picky that it won’t do many of them any good at all. Plus the whole plan will get caught up in politics and take forever to implement.

Really, it’s kind of like the S & L thing all over again in that the problem will move forward rapidly while solutions move forward with agonizing slowness dragging the economy down with it.

And somewhere in this we will have a new “Charles Keating” as the poster boy for mortgage fraud. I’d like to nominate some of the folks from TJ Wakonia.

John Stenback December 3, 2007 at 11:19 pm

Are the introductory rates on the ARMs lower than prime rates?How about just raising them to a prime rate – something affordable to the borrower and the lender? When the mortgage lender charges the subprime borrower, which is to say, those least able to afford it, the most in interest rates, aren’t they( mortgage lender) in turn increasing their own risk? That doesn’t make sense.

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