Bank Regulator Says Freeze Subprime Adjustable Rate Mortgage Interest Rates
By Jill Michaux, Kansas Bankruptcy Attorney on Oct 6, 2007 in Chapter 13 Bankruptcy, Kansas
Our country’s top bank regulator told lenders to “get on with it” and freeze interest rates to fix the subprime, adjustable rate mortgage crisis, according to CNNMoney.com.
FDIC Chair Sheila Bair urged lenders at the Clayton Annual Investor Conference in New York this week to convert subprime, adjustable rate mortgages (ARMs) into fixed rate loans now. Use the starter rate, she said. It is too time consuming and expensive to restructure millions of ARM loans one loan at a time.
Her message was loud and clear that lenders should solve the debacle themselves or have the problem solved for them in ways they oppose such as the bill pending in Congress that would allow a bankruptcy judge to modify a home mortgage discussed in a recent posts by Dana Wilkinson and Andy Miofsky.
ARM lenders are facing huge losses in the explosion of foreclosures as more and more people cannot afford to pay their mortgage payments. ARMS typically have low introductory “starter” interest rates for two or three years and then change to much higher rates causing payments to go up substantially. More than a million ARMs are scheduled to reset by the end of 2008.
Bair is a native of Independence, a small town in my state of Kansas. She was graduated from the University of Kansas with a bachelor’s degree in philosophy in 1975 and a law degree in 1978 at KU. She formerly worked for the New York Stock Exchange and the U.S. Department of the Treasury. She was appointed FDIC chair in 2006.
The Federal Deposit Insurance Corporation was created by Congress during the Great Depression in 1933 to restore public confidence in the nation’s banking system. FDIC insures deposits and regulates banks and savings associations.
See Chip Parker’s discussion of the effect of the subprime mortgage debacle on the stock market.
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