Rate Freezes Won't Solve Foreclosure Problem

The wires are reporting that the White House is working on a plan that would freeze rates on adjustable rate mortgages for certain borrowers, in an attempt to help curb the rapid increase in home foreclosures expected in coming months.

While it certainly will help the situation, consider a slide from Countrywide (CFC)'s Keynote Presentation at the 37th Annual Bank of America Investment Conference in September which showed the following:

Causes of Foreclosure (July 2007)

58.3% Curtailment of income
13.2% Illness/Medical
8.4% Divorce
6.1% Investment property/Unable to sell
5.5% Low regard for property ownership
3.6% Death
1.4% Payment adjustment
3.5% Other

Very interesting...

Comments

[nyc10021:]

Interesting indeed and shows that the new (Paulson/Clinton/Bush) plan is mostly political and will not solve much, but sounds good. Simply put, the curtailment of income category is people that never should have been able to get (give actually) a mortgage from CFC and never had any income to curtail. If that first category was simple curtailment of income, unemployment rates would show a dramatic increase. The problem is that CFC can’t say that they lent $ to anyone and everyone.

2007 Dec 06 06:05 AM

[jim s.:]

If CFC provided this info I would take it with a grain of salt. My first question would be how does this affect CFC? My second question would be how old is this data?

But doesn't the curtailment of income fly in the face of these great employment numbers we keep getting? I mean, foreclosures are way up in the past few quarters but the economy just keeps adding jobs. The only way I see this making sense is if people are losing good paying jobs and finding lower paying jobs to replace them. Then they fall behind on the mortgage.

I think many more foreclosures are due to resets today than that table shows. Not that people should be bailed out, mind you. That's just obscene.

2007 Dec 06 08:50 AM

[User 9719:]

All lies. The cause of foreclosure is because the home debtor is not able to find a bigger fool to buy the home for what the debtor paid. Lenders are not lending $900,000 for $100,000 homes any longer. This makes it hard for a bigger fool to pay more than the last fool paid. So if the home does not sell, the debtor walks away from it and the lender has to foreclose. Think hard and figure this out.

2007 Dec 07 02:33 AM

[User 103115:]

If the data is recent and accurate it suggests the Treasury plan to help keep people in their homes will be ineffective, but as someone who has gathered a lot of data inside corporations for just such presentations, I share the skepticism expressed in other posts about what CFC is trying to communicate.

2007 Dec 07 11:23 AM

[User 128587:]

We Republicans have always gone by the motto "less government, more private enterprise" and other such slogans showing how Americans are the most innovative people in the world and a private market is always the best solution; all of which I agree. It just seems like the Bush Administration is too afraid to see the market correct itself and I have to admit there is a side of me that shows compassion to the newly and future evicted homeowners. We refinanced our home to a 30 year fixed rate in 2005 and after 2 years paying the high payment we decided to sell the house $100,000 below the market peak after moving to a new area, this instead of renting at a loss and possibly jeopordizing our finances. This move by the Administration seems to say, "God forbid those home values to drop!" Are the upper officials looking at information we don't have and really trying to avoid a depression like the 1930's?

2007 Dec 07 05:09 PM

[matt...:]

well, you Republicans haven't actually applied that motto for quite a while. Since Reagan, Republicans have been no different than Democrats in expanding the federal govt. You guys just convince the public that your plans are "free" and let the next guy raise taxes to pay for them. Most every pol is the same; they love capitalism and "free markets" until it might cost them a vote...

Vote for Ron Paul, he's the only one that makes any sense!

2007 Dec 07 07:56 PM

[Greg Boop:]

Keep in mind that the adminstration's Mortgage Plan is really a bailout of the banks rather than the homeowners. The concept of moral hazard applies to the banks irresponsible behavior more properly than the impacted homeowners. Some further commentary can be found at:

The Mortgage Plan
hingefire.blogspot.com...

The Mortgage Bailout: Moral Hazard
hingefire.blogspot.com...

2007 Dec 08 11:18 AM

[OC renter:]

Treasury Sec. Paulson was an executive at Goldman Sachs, so he is going to help out his colleagues. Regardless of what they say, this plan is not meant to help the average homeowner. Look at who was involved in setting it up--Paulson and other financial company execs. I didn't hear of anybody representing the avg homeowners involved in the bailout plan.

2007 Dec 08 07:40 PM