Mortgage News

Thursday, February 21, 2008

Foreclosure Crisis... What if?

The following two months bring the highest number of adjustable rate mortgages reaching the first and most shocking payment adjustment. Something over 100 billion a month vs. the 30 to 50 of the last 3-4 months.

Inevitably many will end up in foreclosure.

Nouriel Roubini was on CNBC discussing the new plan to freeze foreclosures for 30 days and follow that up with this post which gave some reasons why it won't help and a possible scenario...

...banks will have to eventually recognize that even a plan that freezes the reset of most mortgages will not be enough. To stop foreclosures
they will have to a accept a reduction of the face value of the mortgage to the lower current value of the home
. While this may be costly to the banks
the alternative of foreclosure and selling such homes in a illiquid market is
worse for creditors. Thus, much more radical policy options should be considered
to avoid the biggest foreclosure crisis in US history.

Do you think this could happen and if it did would it actually

What would be the fair way to select who gets a reduction?

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