How Banks are Worsening the Foreclosure Crisis:

[debbierlus]

Really, they should just cut interest rates to 5% for everyone. Hundreds of dollars extra in millions of people's pockets every month. They would stem off a lot of foreclosures, and pump the economy at the same time. The banks would still collect interest and make money. Probably much more then if they don't do it - but I guess they would rather borrow our nation into zillions in debt then work out a solution with borrowers.

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The bad mortgages that got the current financial crisis started have produced a terrifying wave of home foreclosures. Unless the foreclosure surge eases, even the most extravagant federal stimulus spending won't spur an economic recovery.

The Obama Administration is expected within the next few weeks to announce an initiative of $50 billion or more to help strapped homeowners. But with 1 million residences having fallen into foreclosure since 2006, and an additional 5.9 million expected over the next four years, the Obama plan -- whatever its details -- can't possibly do the job by itself. Lenders and investors will have to acknowledge huge losses and figure out how to keep recession-wracked borrowers making at least some monthly payments.

So far the industry hasn't shown that kind of foresight. One reason foreclosures are so rampant is that banks and their advocates in Washington have delayed, diluted, and obstructed attempts to address the problem. Industry lobbyists are still at it today, working overtime to whittle down legislation backed by President Obama that would give bankruptcy courts the authority to shrink mortgage debt. Lobbyists say they will fight to restrict the types of loans the bankruptcy proposal covers and new powers granted to judges.

More at http://news.yahoo.com/s/bw/20090213/bs_bw/0908b4120034085635

[customerserviceguy]

1. Most loans are around that amount already

And in the cases where they are above five percent, that rate was determined by the borrower's financial circumstances at the time the loan was made.

Your suggestion is sort of like asking workers to all take a cut in pay to prop up the companies they work for. Indeed, many people are taking cuts in pay to avoid having their co-workers laid off.

The foreclosure crisis is primarily due to the real estate bubble's collapse, and secondarily due to the loss of jobs caused by the same collapse, which has had repercussions on the entire credit market. We are left with the sad choice of either putting a band-aid on the puncture of the bubble and pumping again furiously, or just letting the collapse find it's own natural bottom.

[Fire1]

2. The interest rate in my case is not the problem. I couldn't get

a better one. The problem is the size of the monthly payments, now that my salary is cut in half. This is where I think the loan re-modification will help. Secondly, most mortgage loans are now 'upside down.' We're paying more for a house than it is actually worth and values may never go back to where they were.