the only way to rescue the Option ARMs is for the govt to provide mortgage debt forgiveness to the FBs holding these toxic loans
here’s an example: FB buys a low-quality tract home for $780K and finances almost 100% of the price – current market value in a forced sale is $599K or so – the monthly payment after the OptionARM resets will double or triple – there are no conventional mortgage products available to help this FB at reset time unless he has $180K available to buy down the mortgage
the govt rescue comes by offering the FB $180K in debt forgiveness and a low interest rate mortgage for $600K – the banks currently holding the mortgage(s) are made whole and the national debt grows by $180K – the FB continues to be a wage-slave chained to a house and everyone is happy (as long as they remain asleep)
~
that would be the rescue plan that politicians and the banking cartel would like to facilitate but there’s a catch (isn’t there always?) – some (many? most?) of these FBs can’t afford the payment on a fixed-rate, fully amortized mortgage even at a below market rate – that is why these people took an OptionARM in the first place!!!
we have to understand that these are people who should NEVER, EVER been allowed to ‘purchase’ residential real estate and they don’t have a chance in hell of retaining ‘ownership’ of these properties long term – providing the FBs handouts from the taxpayer’s pocketbook will only prolong the misery – the result will be the same: short of the taxpayer giving these properties to the FBs, they will end up as NODs, NOTs, foreclosures, REOs, etc until they reach a price where the mortgage can be supported by local rents/wages
the ‘investor’ is another category of OptionARM holder – this person is also going to walk away from their property and mortgage when it resets because they can’t afford the monthly payments that their ‘investment’ will require – the only way they will continue to pay on the property long-term is if the mortgage can be supported by the rents – without some kind of mortgage debt relief there is very little incentive for this ‘investor’ to continue supporting an upside-down property with negative cashflow
~
we have discussed the ARM reset chart several times – search the archives on ‘arm reset chart’ and ‘credit suisse’ and you will find them
