News That Major Bank Coalition To Freeze ARM’s Pleases Boulder Realtors

foreclosure-sign.jpgA recent report from Washington has Boulder Realtors, national Realtors and homeowners in other area markets encouraged. The sources say that a coalition of major banks that hold sub-prime mortgages are firming up the final parts of a plan to freeze several hundred thousand ARM’s.

This could spell relief in many ways. If these banks prevent the current adjustable rate mortgage loans from adjusting to much higher rates, many homeowners that might otherwise lose their homes to foreclosure will find themselves in a great place.

The banking industry is finally seeing the writing on the wall and realizing that it’s not in their best interest to trigger mass defaults and foreclosures.

Should sub-prime ARM’s that are due to reset to much higher rates (upwards of 12 % or more) actually get reset, many homeowners could be forced into costly foreclosure proceedings that could prevent a rebound of slumping housing markets. This could cause a national net effect and spread to other industries, potentially even tipping the economy into recession according to Washington sources.

In Boulder, we’ve seen some corrections in pricing but most of the national attention hasn’t really played out the same way in our local Boulder housing market.

For the few in the Boulder area and for many in Larimer, Weld and Adams Counties that are seeing a trend closer to that of the other hard-hit parts of the nation, this could spell relief if it comes in time.

The banking coalition met Thursday at the Treasury department and briefed Treasury Secretary Henry Paulson and federal banking regulators on their progress toward creating an industry-wide approach to sub-prime loans.

Seems that the banks are getting the idea that, at least at a national level, it’s looking better for them to avoid the catastrophe of turning into property owners on a grand scale. With most of the current ARM’s still at ‘teaser’ rates of 7% to 9% (still a profitable and desirable rate for most banks) they are thinking that keeping these loans current is better than the alternative dilemma of having all these houses back.

About $600 billion of sub-prime adjustable-rate mortgage loans are held by roughly 2 million homeowners in the U.S. teh coalitoin of major banks with exposure to “problem” subprime mortgages is finalizing a plan to freeze hundreds of thousands of these loans at their ‘low’ introductory rate.

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One Response to “News That Major Bank Coalition To Freeze ARM’s Pleases Boulder Realtors”

  1. Nora Ziel on December 18th, 2007 8:11 pm

    You may be interested to know we’ll all be paying for the foreclosures. Fannie Mae has instituted an “Adverse Market Delivery Fee” of 25 basis points on every loan delivered after January 10, 2008. Currently jumbo and government loans are not subject to this new policy.

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