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impact of govt freezing interest rates

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ccooper

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Mar 9, 2002
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Certified General Appraiser
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Missouri
Local newspaper called and asked for us to comment on a story they are running on the Treasury Secretary attempting to freeze interest rates on owner occupied mortgages. Attempt to prevent future foreclosures when ARMs reset to higher interest.

I didn't know what to tell him. I told him that our local (smaller) market has not been negatively impacted with respect to prices or values based upon what has happened so far. Therefore, I didn't really think it would have any affect on our local values. I did mention though that FL, CA and Las Vegas might experience something positive from government intervention. Some other markets where many houses on the same block are now for sale as bank repos might be a different story.

I've always been against government intervention in the free market. What say all of you?
 

JSmith43

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May 5, 2003
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Certified General Appraiser
State
California

Randolph Kinney

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Apr 7, 2005
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Retired Appraiser
State
North Carolina
For those borrowers that are upside down in their loans, freezing their rates may not provide a benfit even if they qualify for the rate freeze.

For sure, the borrowers who don't qualify, they absolutely have no incentive to pay on a reset rate if they have no equity.

I really don't see how this plan works. It gives a discentive for anyone who does not qualify to continue paying.
 

Greg Bell

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Gvmt Agency, FNMA, HUD, VA etc.
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Louisiana
Inventory will soar and home prices will plummet.Since no more new teaser and probably very limited ARM loans will be originated the buying public is left with generic FHA and Conventional loans.Sounds like what is should be , wrong , this takes about 30% of those that cannot qualify conventionally right out of the market.Don't forget all of the MBS (Mortgage back securities) that will take a dump due to no returns or a negative worth after they are revalued due to intervention in the market place.Should push us into a deep recession , maybe even a depression .This is very good 1930's government action...Quick , Buy some beans and Ammo..
 

Laura Goldware

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Jun 6, 2004
Professional Status
Certified Residential Appraiser
State
Florida
Rate Freeze Done

According to Yahoo Finance. Rate freeze is a done deal.

How will this affect appraisers? No one will need to refi and they certainly aren't moving to a new home.

I wonder if this the BIG annoucnement Countrywide was supposed to make tomorrow. I'm hearing it's massive layoffs but who knows.


http://biz.yahoo.com/ap/071205/mortgage_crisis.html
 

Non Sequitur

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Feb 14, 2002
Professional Status
Certified Residential Appraiser
State
Louisiana

Greg Bell

Senior Member
Joined
Jul 7, 2006
Professional Status
Gvmt Agency, FNMA, HUD, VA etc.
State
Louisiana
According to Yahoo Finance. Rate freeze is a done deal.

How will this affect appraisers? No one will need to refi and they certainly aren't moving to a new home.

I wonder if this the BIG announcement Countrywide was supposed to make tomorrow. I'm hearing it's massive layoffs but who knows.


http://biz.yahoo.com/ap/071205/mortgage_crisis.html
There will be plenty of REO'S.If a mortgage debtor can't move , they will walk away..
 

Ted Martin

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Jan 17, 2002
Professional Status
Certified General Appraiser
State
Kansas
I was under the impression that the freeze was going to be temporary, I believe for up to five years. The reason for the freeze was to buy time for the servicers to renegotiate the terms on a one on one basis. The problem is that the originators don't have a horse in the race after the loan is packaged and sold to the investors and managed by the servicers. The servicers are dragging thier feet because they say their contracts don't allow them to renegotiate the terms (plus they make more if the loans go to foreclosure in additional fees). The investors are getting killed because they are losing up around 25% or more when the loans go to foreclosure versus maybe 5% if they can keep the borrower in the home. The difference between the S&L crisis and this time around is that the loss can't be managed because no one intity has control. When the RTC was closing banks they had control of the asset, it's management, marketing and ultimate disposal. A rate freeze is about the only across the board action that is available to the government to give the private sector time to figure out what they are going to do to solve their problem. From my perspective there are no across the board actions available to any of the player, each loan will have to be renegotiated one at a time, and that will take years. The rate freeze probably won't change the total number of foreclosures but it will spread it out over time so the rest of the economy does slide into a depression. Regardless of what action is taken there will be plenty of REO's.
 

Mark to market

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Nov 14, 2004
Professional Status
Certified Residential Appraiser
State
New Mexico
The Wall Street Journal has an editorial today, which agrees with several of the above posts. A few thoughts from the article;

"At a minimum (contract repudiation) will raise the future risk premium that investors will demand for investing in U.S. real estate."

A problem with imposing loan forgiveness is that all borrowers will argue they should benefit.

"A rolling loan gathers no moss philosophy... similarity to the strategy that prolonged the S&L crisis and Japanese banking crisis."

The treasury wants states to float bonds to refinance loans...clearly a taxpayer-financed bailout.

Investors typically lose 30% to 50% of the unpaid mortgage balance when a home has to be resold due to foreclosure. So they have every incentive to renegotiate sub-prime loans that are expected to become delinquent. That process is already well under way

Hillary Clinton has made it an Argentina double by suggesting combining price controls and price repudiation thru the end of her reelection campaign in 2012

"...62% of Americans oppose a mortgage bailout. ...95% of Americans are making their payment on time
 
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