David Lentz

Options Trader: Tough-Decisions Tuesday

Phil and Cover -- you misunderstand me -- I do not think that ANYONE would willingly sign up for a hundred-year mortgage. But rather that the still-outstanding ARMs (which are going to continue to implode like clockwork as their rates ratchet up), be forcibly converted to fixed-rate loans, with the rates at reasonable levels so that they can maintain the payments, but that they would suffer for their foolishness, and their lenders not bear all the punishment, by having the terms of those mortgages extended until the total interest collected would be the same as it would have been under their current ARMs.

I repeat, this would only apply to existing ARMs. New mortgage seekers would be free to choose any kind of mortgage they could obtain (except ARMs, which should be barred from use by homeowners). The intent here is to stop the implosion of the existing ARMs, and stop the build-up of the housing overhang. That's all.

And this would do so, far more cheaply than any other scheme. And at this point, it appears that cheap is a major consideration, Uncle Sam having blown the family nest-egg at the local saloon.