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.
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!