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Option ARMs: The Banking Backdrop of 2009

The problems with the Option ARMs that you've mentioned are compounded by a number of factors that seem to correlate with these products.

First, these loans were typically made to borrowers who were betting on appreciation. Second, they're often made to borrowers who are self-employed... many of whom are not very good personal money managers. Third, and most pernicious, is that these loans are nearly all 100% LTV, often with "generous" appraisals.

Not only would most of these borrowers need considerable payment relief on the TEASER rate in order to stay, they'll more than likely walk without substantial principal writeoffs... which most lenders are unwilling to offer.

Is the U.S. Banking System Safe?

[Home prices have historically tracked inflation and are likely to revert to the mean. ]

I agree with NY above that inflation is going to accelerate, but with all of the reasons that housing prices have to continue to decline, I'm wondering if house prices may decouple from that measure.

Banking Sector: Band-Aids Just Won't Do It

[Investors in junior securities, be they common shares, preferred stocks or subordinated debt, enjoy premium returns in the good times and bear disproportionate risks in the bad. They should not have a seat at the table in a bail-out scenario. ]

Should not, but do anyway. They managed to squeeze out a ride-along amendment to the housing bill, so they get to share in future appreciation. Do you suppose they'll now leave their seat at the table?

New Lender Guidelines To Help Struggling Homeowners

[and would in most cases receive a final decision on whether they will receive help with their loan within 45 days.]

They're already far, far, very, very far short of this standard.

This new plan appears to be a combination of "nothing new" and promises that can't be kept.

They say that they'll "consider" things... such as principal reduction... when the recent Boston Fed paper clearly states that such a consideration makes no sense.

I love how these announcements really say nothing at all.