Comments on The Peridot Capitalist: Why Rate Freezes Won't Solve Foreclosure Problem

This is exactly, exactly right!It doesn't really m...

2007-12-10T12:44:00.000-06:00

This is exactly, exactly right!

It doesn't really matter what your rate is, if your income drops in half or is eliminated completely. And the majority of foreclosures that I come across is due to these top three reasons, with very few ever claiming that a higher payment is the direct cause of foreclosure.

If anything, a rate increase will contribute to the homeowners falling behind faster if their income decreases due to job loss, medical expenses, divorce, death, etc. But few foreclosure victims are that blindsided with a rate increase which directly leads to foreclosure.

Freezing rates and demonizing subprime lenders makes for a good press release, but it won't help actual homeowners.

You capture part of the problem where 58% of forec...

2007-12-06T09:42:00.000-06:00

You capture part of the problem where 58% of foreclosures are tied to income events. Remember Texas in 1984? or Massachusetts in 1988? When people get loans with 0%,3%,5% down and the value of the property drops 15% it becomes very easy to leave the keys in the front door. (witness Houston 1984).
Why nake payments to negative equity when you've lied about your income?

I would suspect there is a wide discrepancy betwee...

2007-12-06T06:37:00.000-06:00

I would suspect there is a wide discrepancy between unemployment within the pool of people with subprime mortgages, versus those in Alt-A or prime mortgages. Also, this data is from July, and rate resets accelerated starting in September and October, so the number is likely higher now than it was. But the overall point remains, rate resets are not the main factor in foreclosures.

I'm a little confused. If this is the case, why di...

2007-12-06T01:54:00.000-06:00

I'm a little confused. If this is the case, why did subprime foreclosures skyrocket? It seems that unemployment has been consistently low all year. How else might income have been curtailed on a large scale?

My .02 - ARM related foreclosures are expected to ...

2007-12-05T18:30:00.000-06:00

My .02 - ARM related foreclosures are expected to rocket. So, this rate freeze is provided as a solution to this expected problem. Curtailment of income related foreclosures are probably steady state problem and will remain flat as long as unemployment rate remains the same.

You are 100% right.Thank you for posting that.

2007-12-05T16:43:00.000-06:00

You are 100% right.Thank you for posting that.