CNN — Rate freeze plan for ARMs gains traction. How will this affect the market if this goes thru?

[Bugs]

I think it comes down to the investors. The teaser rates already represent a negative cash flow and every year at that rate only increases the amount of the principal. Bear in mind that some of these teasers are a lot lower than 4.5%.

If the investors are dumb enough to think that the market is going to turn around and cover the borrower’s positions they might agree to the short term losses with a view of recouping them later. The question is, how dumb are these investors?

If I’m holding one of these SoCal-backed CDOs I’m going to recognize that my loss upon liquidation in 2007 is going to be less than if I wait until 2009 or 2010. I’m going to recognize that the only way I break even is if the current trend stages a spectacular reversal and my borrowers’ positions – which have degraded even further by the extension of the teasers – get covered. That would take price increases well beyond the original purchase/refi values that got them into this mess.

As far as I’m concerned, this is posturing on the part of the polticians and the banks. Meanwhile, we still have 10+ months of inventory sitting around in SD County and a sizable number of other would-be sellers casting about in search of an exit that doesn’t involve a short sale or foreclosure. At most, a bail out will only slow the pace of correction down, increase the amount of collateral damage; and worse, burn the investors beyond all recognition.

[no_such_reality]

They’re not talking about locking at 4.5%. They said in the WSJ yesterday that the loans they’re considering would lock at between 7-9% instead of adjusting to 9-11%.

[no_such_reality]

They’re not talking about locking at 4.5%. They said in the WSJ yesterday that the loans they’re considering would lock at between 7-9% instead of adjusting to 9-11%.

[no_such_reality]

They’re not talking about locking at 4.5%. They said in the WSJ yesterday that the loans they’re considering would lock at between 7-9% instead of adjusting to 9-11%.

[no_such_reality]

They’re not talking about locking at 4.5%. They said in the WSJ yesterday that the loans they’re considering would lock at between 7-9% instead of adjusting to 9-11%.

[no_such_reality]

They’re not talking about locking at 4.5%. They said in the WSJ yesterday that the loans they’re considering would lock at between 7-9% instead of adjusting to 9-11%.

[NotCranky]

Somebody posted a link to a report meant to clarify misconceptions of the envisioned rate locks. I spent some time trying to find it but failed. Maybe someone else remembers that post?

[NotCranky]

Somebody posted a link to a report meant to clarify misconceptions of the envisioned rate locks. I spent some time trying to find it but failed. Maybe someone else remembers that post?

[NotCranky]

Somebody posted a link to a report meant to clarify misconceptions of the envisioned rate locks. I spent some time trying to find it but failed. Maybe someone else remembers that post?

[NotCranky]

Somebody posted a link to a report meant to clarify misconceptions of the envisioned rate locks. I spent some time trying to find it but failed. Maybe someone else remembers that post?

[NotCranky]

Somebody posted a link to a report meant to clarify misconceptions of the envisioned rate locks. I spent some time trying to find it but failed. Maybe someone else remembers that post?

[hipmatt]

Excellent analysis bugs and stan.

I agree that this is mostly a publicity stunt to make the politicians look like they are trying to help.

If true, few people will qualify for the freeze, financial stocks will take a beating, and it will just make loans harder to get for the rest of the buyers out there. More money for the FBs = less money for the rest of us. Either way it will affect demand for homes in a negative way. Also, those who own the paper that hold these loans will be walking away and never returning. Like mentioned above, this won’t do anything for the already insanely high amounts of homes for sale, except by making qualifying even harder.

Personally I feel that it will have little to zero effect on the currently crashing RE market.(especially in way overpriced socal)

[hipmatt]

Excellent analysis bugs and stan.

I agree that this is mostly a publicity stunt to make the politicians look like they are trying to help.

If true, few people will qualify for the freeze, financial stocks will take a beating, and it will just make loans harder to get for the rest of the buyers out there. More money for the FBs = less money for the rest of us. Either way it will affect demand for homes in a negative way. Also, those who own the paper that hold these loans will be walking away and never returning. Like mentioned above, this won’t do anything for the already insanely high amounts of homes for sale, except by making qualifying even harder.

Personally I feel that it will have little to zero effect on the currently crashing RE market.(especially in way overpriced socal)

[hipmatt]

Excellent analysis bugs and stan.

I agree that this is mostly a publicity stunt to make the politicians look like they are trying to help.

If true, few people will qualify for the freeze, financial stocks will take a beating, and it will just make loans harder to get for the rest of the buyers out there. More money for the FBs = less money for the rest of us. Either way it will affect demand for homes in a negative way. Also, those who own the paper that hold these loans will be walking away and never returning. Like mentioned above, this won’t do anything for the already insanely high amounts of homes for sale, except by making qualifying even harder.

Personally I feel that it will have little to zero effect on the currently crashing RE market.(especially in way overpriced socal)

[hipmatt]

Excellent analysis bugs and stan.

I agree that this is mostly a publicity stunt to make the politicians look like they are trying to help.

If true, few people will qualify for the freeze, financial stocks will take a beating, and it will just make loans harder to get for the rest of the buyers out there. More money for the FBs = less money for the rest of us. Either way it will affect demand for homes in a negative way. Also, those who own the paper that hold these loans will be walking away and never returning. Like mentioned above, this won’t do anything for the already insanely high amounts of homes for sale, except by making qualifying even harder.

Personally I feel that it will have little to zero effect on the currently crashing RE market.(especially in way overpriced socal)

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