Should Obama's Administration be concentrating on mass re-financing?

[MessiahRp]

Watch this: http://www.cbsnews.com/video/watch/?id=4668112n%3fsource=search_video

Personally I worry that the real economic collapse is around the corner once these Alt-A/Option A loans reset (see 3:40 of that video for an eye opening chart). If we really want to stabilize the economy, shouldn't the Government step in and help force the refinancing of these loans to fixed rates? Even if it extends the loan periods from 30 to 40-50 years to make it viable, the more of these loans that are saved the less of a chance that everything collapses.... it's inevitable that there will be some defaults but we need to get the payments on these loans to retain their current or even a slightly lower rate if we want people to be able to maintain any spending ability and not further crush the market.

I know McCain mentioned this late in the campaign (to a major scoff here and amongst Republicans) but it might be that the only way to stabilize the economy is to pre-emptively force a mass refinancing of these loan types (as well as make them illegal to offer in the future).

Another thing, as someone who worked as a Mortgage Loan Servicer for WaMu in 2003 (and took serious heat for telling people to refinance to Fixed Rate mortgages and not ARM loans) I would think we should regulate that anyone who is purchasing their first house be forced to take a real estate course... even if it's only a few hours of classes, so they understand everything that comes with owning a home. You would not believe how many people had no idea about terms of their loans, how escrow worked, etc.

To go bankrupt you have to go through a quickie credit course to make sure you understand what you're doing and to help you understand how you screwed up in the first place. A similar requirement could help a lot of people understand how these loans work and be smarter about going into one.

The next wave may be much bigger than the first... if Obama truly wants to stabilize and prevent a second wave... I think mass re-financing may be the only way to go.


Rp

[DJ13]

1. The government needs to step in and nationalize our banking system

That would probably be the only chance we have to rewrite all the outstanding mortgages.

The way the banks chopped and sliced the underlying bonds that represent mortgages it would be nearly impossible to do it any other way than by force.

[JDPriestly]

2. I immediately suggested refinancing for longer mortgage terms.

That alleviates the losses from the mortgages themselves. Of course, that was before I learned that the real problem is the gambling on the mortgages in the big hedge funds.

The mortgages should be refinanced, but the problem, the corruption also has to be attacked directly before confidence can be restored to the markets.

[MessiahRp]

3. What do you think would rein in the corruption?

More regulation? Nationalized Banking (as the poster above suggests)?

I honestly think that there would be some serious benefit to suggesting a plan that addresses all sides of this problem. Of course I too want to make sure I can wrap my head around all of the angles since there seem to be so many.

Rp

[JDPriestly]

4. Strengthening oversight. Closing the loopholes in government oversight

of the markets.

[NNN0LHI]

5. Aren't the ARM's down to about 3% interest right now?

I think they are. Won't get too much better than that.

Don

[MessiahRp]

6. No but it's not about where ARMs are now...

Because they won't be there forever and when the rates reset all the people counting on payments at the 3% rate will default on their loans.

I don't think there's anyway to compete with these gimmick loan rates in a mass refinance... rather we need to make those fixed rates viable as long as possible. So if someone is paying 7% with the guarantee that their loan's rate doesn't jump big time well then that's going to have to work.

We need to keep as many of these loans from defaulting as possible.

[Fire1]

7. Please post this idea on Change.gov. and e-mail your

Congressman. Thanks

[SoCalDem]

8. The "problem" was that if first time buyers would have had to use fixed rates,

many if not MOST of them would never have been "able" to "buy" the homes they ended up in (if only for a few years)..

People who are just barely "affording" their no/low interest-only payments surely could/would never be able to pay a PITI mortgage payment on that house..or maybe even a house worth HALF what they "paid"..

For a long while, "buying" a house was touted as "easier and cheaper than renting", and the mortgage "industry" saw to it to make it just so..

Churn was the mantra...keep writing loans, collecting fees, and then pass it on & do it again and again..

People (especially young people) with no skin in the game, and a house that "escalated" in artificial value saw an opportunity for "free money" in the form of HELOCs and re-fis, so are people that surprised to find out that many of them took advantage of their change to grab that brass ring...

It's hard to give up the dream house and yet it was always just a dream for many of them..They just got a chance to live high on the hog for a few years, and are now back where they started.. The real "criminals" here are the builders who built waaaay too many houses in places they never should have been allowed to build..

In many cases these developments were ill-conceived, and chock-full of houses that were thrown together in a hurry, full of flaws, and are now sitting there like rows of skeletons, and for the people who are still in some homes, often the builders have skedaddled, or are out of business, so the flaws these people are living with, are unresolved for them, and their property values are getting less and less, yet their payments are not..