People with bad credit were pissed when all the houses were flying off the market and they couldn't get in on the action. Lenders responded by offering these buyers adjustable rate mortgages, and they took them.

The interest rates went up, and the price of houses dropped, and now people who gambled on getting these adjustable rate mortgages are in the suck.

They can't afford to pay their bills and they can't sell their houses without taking a loss. This alone means the lenders are taking it in the pants and mortgage companies have already went out of business because of this.

What do Democrats want to do about it? They want to force lenders to reduce the mortage amounts to what the homes are now worth, they want to freeze the rates for five years, and stop forclosures.

BTW, the majority of the forclosures taking place aren't from buyers not being able to afford their mortgage, its buyers jumping ship now that they see their house isn't worth as much as they paid for it. Rather than keep their end of the deal, they're dumping it back on the lender.

Speaking of keeping your end of the deal, these measures to "fix" this problem make no sense to me. They penalize the party that kept their end of the deal for the benefit of the party that won't keep their end of the deal.

The whole problem is created by consumers incapable of basic math, and predatory lenders who are aware of that fact, IMO.

Our banking regulation is highly favorable to the banks. It should be completely reformed. The banks would be much less prone to making all of these bad lending decisions if they actually had a fear of not getting paid. As it is, they can borrow an almost unlimited amount of funding to cover their mistakes.

Our education system should be completely reformed. People would be much less prone to taking out these loans if they understood that they had no realistic chance of paying them back.

The current rate freeze by the banks is completely voluntary. They were called into a conference with select government officials, who pointed out that foreclosing on the large number of loans considered probable to default wasn't in their best interest, unless they were looking to enter into the real estate business. Unsuprisingly, they agreed that this was indeed the case.

The fact that it was even necessary for anyone to point this out to the banking industry is indicative that the individual lenders are far, far too insulated from normative market pressures, which should be severely discouraging them from making these types of loans at all.

It all comes back to the central banks distorting influence. I'm continuing to educate myself in this area, but this seems to be a universal factor contributing to an infinite number of problems. Nothing financial is unaffected by the actions or inactions of the Fed.

If they - the lenders end up getting pinched even more than they are by enduring all these forclosures, I'm pretty sure in the near future only those with pristine credit will have any chance of being able to take out a mortgage. And the same people who are fleecing the lenders now and calling them predatory, will be griping about them not giving "the poor working class folks" a chance to buy a house tomorrow.

These lenders deserve what they get if they gave out loans to people they shouldn't have - that was a gamble too, but they should have to be penalized even more.

Who's fleecing the lenders? Is there any evidence of people allowing foreclosure because of a negative change in the value of the property? I've never heard of it, and if anyone is doing it, they're fools. If they signed up for an ARM, they're fools, anyway, so it's not outside the realm of possibility. It's not in their interest to default on a loan, regardless of changes in the value of the property.

Sub-prime lending is nearly predatory by definition. They were well aware, as all lenders are, of the financial position of those seeking the loans. The individual loan officers push people into loans without any consideration for the reality of the situation. It's great salesmanship, as most loan officers are paid based on the initial loan, but it's a poor lending practice. No one else, the consumer or the lender, benifits from a loan doomed to foreclosure.

I don't have much sympathy for either side of this debacle, and it's hardly the huge issue that they claim it is. I heard someone on the radio commenting on what percentage of the housing market these loans made up, and it is very, very, very small. I don't remember the exact number, but I believe it was less than 1%.

You are right, it's not that big a deal - only 5% of subprime mortgages are in foreclosure.

The Democrats are the ones talking about fleecing the lenders.

I'm not sure that the foclosing buyers are stating as a reason that their property devalued, but the figures show the forclosures are happening most where that is the case more so than because they can't afford mortgage payments at higher rates. I'll revisit the column where I saw that info make sure I'm remember my facts correctly.

We bought our house about 4 or 5 years ago. I'll agree, those lenders are slimey lot, and they did like pushing these ARMs. We sort of used it to our advantage tho. We grabbed a 80/20 loan with no down payment with a nice fixed rate on the 80 and ARM on the 20 which started out crazy low, like 1.3% or something. We had the 20% downpayment ready, but if I recall, wouldn't have been able to get a fixed rate on a conventional mortgage as low as we did on the 80%.

So, we let it go with a 80/20 and once the rate slid up past what we were earning on the 20% we had invested, we paid off the 20 part and were left with a nice rate on the remaining 80%.

Anyway, I hope the result of all this will be that high risk borrowers won't be able to take out a loan.

It reminds me of that ATM thing in California a few years ago. The nannys decided its unfair for banks to charge non-members $2 to use their ATMs. So they got a law passed that banned the practice. The next day, the banks made it so only members could use their ATMs. The law was repealed shortly after.

Haha, I hadn't heard about the ATM fees. Of course, the fees are the only reason they allow patrons of other banks use their ATMs, lol. It's hard to believe that such clueless people are elected.

I second that about the unqualified borrowers. If they want to fix the "housing crisis", they should bring high-paying jobs back to the U.S. by repealing some of these assinine regulations. They could even say it was, "for the children". It's a win-win, lol.

The biggest problem with sub Prime mortgages is that the US banks unloaded most of them to European banks who thought they were getting a great deal. It has caused a lot more financial problems in Europe and Asia than in the states.

Have a look at these articles ...

portland imc - 2007.11.24 - The Financial Tsunami: Sub-Prime Mortgage Debt is but the Tip of the Iceberg
The Hindu Business Line : Sub-prime crisis: Europe trains guns on US