The gummint is obviously doing whatever they can to avoid the set-off of Credit Default Swaps (45.5 TRILLION $$ worth in US), which would make subprime look like childs play. Goldman holds bags of this shit and doesn't report it on the books.
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
âHope Nowâ?: US, banks, near plan to freeze subprime rates
- Thread starter ASusilovic
- Start date
Quote from PAPA ROACH:
The gummint is obviously doing whatever they can to avoid the set-off of Credit Default Swaps (45.5 TRILLION $$ worth in US), which would make subprime look like childs play. Goldman holds bags of this shit and doesn't report it on the books.
I agree. The government can't stop the inevitable they can only forestall it. I guess after they freeze these assclowns rates they will take a look at forgiving their credit card debts as well. Ah don't you love capitalism.
The only thing that should be adjusted in the resets is the LIBOR benchmark.
Detach LIBOR as the benchmark against which the resets will take place and replace it with a more traditional benchmark against the US 10 year treasury note.
This simple action would make the Fed rate cuts more effective in helping mortgage resets. Many foreclosures would still happen, but there would be a good portion of people able to afford the new resets and lock in at a good long term rate.
LIBOR is running high due to the mismanagement at the banks and the general distrust of one bank to another. Getting away from the LIBOR adjustments would start to unlock some of the credit freeze that exists right now.
Good Luck!
Detach LIBOR as the benchmark against which the resets will take place and replace it with a more traditional benchmark against the US 10 year treasury note.
This simple action would make the Fed rate cuts more effective in helping mortgage resets. Many foreclosures would still happen, but there would be a good portion of people able to afford the new resets and lock in at a good long term rate.
LIBOR is running high due to the mismanagement at the banks and the general distrust of one bank to another. Getting away from the LIBOR adjustments would start to unlock some of the credit freeze that exists right now.
Good Luck!
Quote from Smart Money:
Ah, you make it sound terrible. Say you buy a 1000 S.F. townhouse for $200,000 and you make $50,000 a year. You never pay down on the note. In 10 years, the property is then worth $300,000. Yeah, thats only $200,000 in 2007 dollars, but the fact is that you can still sell your house and pocket 1/3 of the total value of the house which is about $66,667 in todays dollars. Not bad at all. Ok...so your payment went up. But now you don't make $50,000, you make $75,000 a year. Again, not too terrible.
When I buy houses I think of it as freezing the price in stone. And right now, I'm paying the bank back with dollars that are becoming worth less and less all the time. Not such a bad deal.
But no...FYI, I am paying the principle on mine.
SM
Exactly! For folks with low interest, fixed rate loans, inflation will make their payments seem very low in a few years. The cost of the money they borrowed can even become negative.
But subprime borrowers with ARM's are essentially locked out of this otherwise happy situation. In a word, they are screwed if interest rates rise, as they will likely do, since we have been in a period of historically low rates. In that case, about all they can do is hope to hang on long enough for 1. a sponsored bailout to come along, or 2. wages to rise faster than interest rates, or 3. property appreciation faster than rate increases, which would allow them to exit these bad loans.
There is a sort of a catch 22 situation for subprime lenders. Higher risk demands higher yield, but higher yield increases the risk of default. It is possible that lenders have been excessively downrating subprimes, i.e., demanding too much interest premium, and as a result, actually increasing risk. There is obviously an optimum interest rate that minimizes risk and maximizes return.
The typical subprime borrower is financially unsophisticated, so even if a path out of their dilemma were available, many would not realize it. The mortgage paper holders must therefore take the lead in protecting their own interests by aligning them with those of the borrower. In the present case, it would seem that some of these holders have realized that half a loaf is better than none. They will be willing to compromise on the returns from these loans. The damage will be bad, but not so bad as it could become if they refuse to compromise. Of course, in reality, they may have enough political power to demand and get a taxpayer bailout. Let's hope not.