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BillSavings.com BlogWhy ARMs are Such a Problem for HousingPosted By Frank
BillSavings.com Brief:
Adjustable rate mortgages are at the forefront of the housing crisis, but what can we do to repair them before the next wave of foreclosures?
According to Gilbert, the $700 billion bailout addresses the credit crisis, but the crisis itself is a “symptom” of the housing crisis. There's a lot of loans out there, he says, that are likely to go into default, or “go bad” as he puts it, in the next few years. He goes on to say that firms and the government should begin to set fixed rates on their mortgages. Quicken Loans has backed away from the adjustable rate mortgage market, and they managed to dodge much of the pain by avoiding these risky mortgages. According to Gilbert, the country has a chance to stop a “next big wave” of foreclosures. Artificially low payments on adjustable rate mortgages will provide “incentive” to walk away from a home when they adjust. In order to stop this, the government needs to intervene and fund efforts to modify loan terms to more favorable terms that encourage home owners to stay in their homes. Category: Mortgage & Loans 11/11/2008
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