Quote:
Originally Posted by Sharroll Celby
Did the interest rates on the "teaser" rates HAVE to climb so drastically? Why did they not climb to the going rate, now about 6 percent?
I would figure the lenders would rather have SOME of the mortgage being paid back, as opposed to NONE of the mortgage being paid back when people walk away.
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They didn't have to, but a deal is a deal - actually, most lenders don't retain the loans that they make, most loans are sold to the secondary market (wall street and entities like Fannie and Freddie who also sell to wall street. The reason that rates went up or go up so fast is the risk level within each loan - some fool out there, actually lots of them figured that people could pay the higher rate, somehow - but, that's not the case (in the millions). Basically, there are huge numbers of greedy bastards out there that were looking forward to the higher yield, but on the other hand a contract is a contract - look to the mortgage brokers as the front line of greedy bastards.
This is such a huge mess - America has not faced anything like this before and may not fully recover for 5 years or more. Unwinding the contracts is not the way to go - just allow the market to work this out with stupid people taking huge hits, but in the end we will still have a capitalist society. Of course BO is working on a socialist society.