Dec 04 2007
Freezing ARM rates?
Henry Paulson, the Treasury Secretary of this great country, has announced that he hopes mortgage companies will soon freeze their rates. He has also urged congress to push through legislation that would regulate the mortgage industry.
He fell short of announcing a 90 day moratorium on foreclosures, which both the Bush administration and Hillary Clinton are toying with.
Why the rate freeze?
Refinancing your house before your ARM rates increase is a fantastic idea. If foreclosure is looming it is an even better idea, but it isn’t always easy. Many loans have early payment penalties, other individuals wil have a hard time getting a loan to cover the amount of the old loan because home prices have declined, creating phantom equity for homeowners. Freezing rates on ARMs would close to a refinance, except not having to get approval or do any paperwork.
Some might say that this unfairly benefits the unscrupulous buyer who didn’t take the time to understand that he or she really shouldn’t have paid what they did to buy a home. This is true, but it also helps the folks who could barely afford a home in the first place.
Too Late?
I don’t have the numbers in front of me, but you can imagine the number of people who have already lost their homes feeling a little jaded at the whole thing. What if a rate freeze would have helped them? I am not sure I know the answer to that question, or even have a viable suggestion. Do you?
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