Freezing ARM Interest Rates Won’t Help Thousands in Foreclosure
By Jill Michaux, Kansas Bankruptcy Attorney on Oct 7, 2007 in General Bankruptcy Information
Freezing interest rates on subprime, adjustable rate mortgages for borrowers who are current with their payments won’t help thousands of Americans who are already having trouble making their home mortgage payments.
The country’s top banking regular, Sheila Bair, FDIC chair, urged lenders to fix the subprime mortgage crisis themselves by converting ARMs into fixed rate loans.
The catch is that she advocates lenders convert loans that are 1) current, 2) for owner occupied homes, and 3) have an interest rate that has not already reset to a higher rate. Thousands of home owners facing foreclosure won’t qualify for help using these criteria.
Freezing interest rates sounds good and make great headlines, but will a speech by the FDIC chair persuade lenders to do the right thing? We already know from a recent Moody’s study that less than 1 per cent of troubled ARMs are being voluntarily restructured by lenders.
More political proposals making headlines include Senator Arlen Specter’s bill offering smidgen of help, discussed by Wendell Sherk, and President George Bush’s plan to prevent foreclosures, discussed by Kurt O’Keefe, which one predatory lending expert said will help few subprime borrowers.
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