Temporary freeze illusory
The Feds are touting a temporary freeze on teaser rate loans which are scheduled to reset soon. Full Story. However, the proposed plan excludes those home loans that piggy-backed a second to cover the missing down payment.
Also excluded are the no-doc loans where evidence of income was not required. Excluding these two categories will leave much of the sub-prime loans in jeopardy.
The home loan industry will agree, in principle, to go along with whatever plan is put forth. But in reality, few re-sets will occur.
What’s really needed is strong federal regulation of the financial sector beginning with credit cards and extending to home mortgages.
Past history including the Savings and Loan industry melt down and now the sub-prime problem demonstrates that without federal oversight, Wall Street will do what ever it takes to make a fast buck.
2 comments
I’ve heard some people talking about this being mainly political cover to stop more effective debt relief programs from being implemented. Are there better plans than this in Congress?
Yes. Congress is considering legislation that would allow bankruptcy judges to re-configure home mortgage loans in Chapter 13 proceedings. At present, this feature known as “cram down” of residential realty is prohibited. If a cram down provision were implemented, a homeowner would be able to exit bankruptcy owing no more than the fair market value of his residence. It is my opinion that support in Congress would have to amount to a veto proof majority because President Bush would be politically incapable of endorsing such a move.
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