What if they tried this here? Moral hazard?

Basically, alter the terms of your loan so that you no longer have to pay anywhere as much as you agreed to. And you get to keep the house, despite not paying what you agreed to pay.

This is the Irish board, so let’s speculate about the reactions of various Irish groups if a similar system were permitted by the ECB here.

How cheerfully would Irish tenants who always pay their constantly increasing rents without any tenants’ rights view such a bailout?

How about Irish people who hold mortgages who never got the benefit of subprime loans and who simply scrimped to pay in full?

I saw a report about this proposal on one of the US channels this evening. The proposal is that it will apply only to people who have kept their head above water but who would face into difficulties if the teaser rates are increased. If introduced, it will not apply to people who are already in arrears. They must be really worried to be contemplating this type of measure. Doubt it would go down too well on this side of the Atlantic though.

All fine and dandy extending the teaser rates, but is the rest of the interest being added on Neg Am Style.

When you take out a 1% mortgage you lump 5% or 6% or more onto the principal.

Extending that for 5 or 6 years while property prices stay low and you’ve got an even deeper problem.

Giving people fake low rates for real, gulp. That’s a seriously messed up system. But hey! whatever it takes to get a Republican into The West Wing eh???


Met with a major fund of hedge funds manager today. They were talking about a new fund they are getting into that is buying heavily discounted mortgage backed securities and trying to rescue the owners. They actually go to the individual owners and do an Eddie to get their finances back on track. In return they “clip the coupon” (I.e. Reduce their repayments). The idea being that over 20 years or more they will get say 90% of the debt and interest paid for maybe 70% of the nominal price. The market finds a way. They turn a profit and people keep their homes.

I love that invisible hand. It continues to amaze.

This solves nothing, those clowns (politicians) want to fix it for homeowners by making those 2% teaser rates reset to 6.5%. Said homeowners took the teaser rates because they couldn’t afford regular rates of 4.75% at that time…go figure!

I thought part of the problem was the banks didn’t know which which loans they had after they were all mashed into CDOs?

I’m surprised someone isn’t buying up those loans at a discount and just extending the terms to 40 or 50 years so people can keep paying into their grave. That’s a nice steady income stream.