Mortgage issues updated

www.msnbc.msn.com...

"WASHINGTON - Hundreds of thousands of strapped homeowners could get some relief from a plan negotiated by the Bush administration to freeze interest rates on subprime mortgages that are scheduled to rise in the coming months.

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We should not bail out lenders, real estate speculators or those made the reckless decision to buy a home they knew they could never afford,” Bush said after meeting with industry leaders at the White House. “But there are some responsible homeowners who could avoid foreclosure with some assistance.”

Bush said 1.2 million people could be eligible for help. But only a fraction will be subject to the rate freeze. Others would get assistance in refinancing with their lenders and moving into loans secured by the Federal Housing Administration, Bush said.

Also, the aid will only come to those who ask for it, he said. Thousands of borrowers who are falling behind on their payments have been sent letters about the options, and Bush also urged people to call a new hot line: 1-888-995-HOPE."

So let me get this straight, and someone correct me if I'm wrong.

1.) there is 2 million mortgages set to reset within the year 2008.

2.) of the 2 million, only 1.2 million are eligable.

3.) of the 1.2 million eligable, only a fraction of them will be able to get the rate freeze, (those being the ones that could qualify for a normal mortgage anyway). What percentage is this? 1%, 2%, or 25%? lets assume a whooping 50% get it(ridiculous). that means that out of 2 million mortgages about to get forclosed on, only 600,000 would be safed.


They estimated that if the mortgagers defaulted, and the houses were forclosed on that it would cost ruffly 200 billion for the 2 million mortgages, or a 100 to 1 ration of loss vs mortage. If this is the case, then Even at 50%, thats still 1.4 million mortgages that would be forclosed on. which at a 1 to 100 ration would mean a loss in the industry of 140 billion. Additionally, I read somewhere that for every dollar lost, the banks have to hold 10 in reserve to protect existing assets, property, and infrastructure. This being said, that 140 billion, just became a 1.4 trillion loss to the economy vs the 2 trillion they were pridicting.

Is there a magic number that translate into us being o.k., vs screwed? like the deficit hitting 10 trillion vs 9.4 trillion?

Please help me understand this, because it sounds to me, even if I high percentage of people could take advantage of the rate freeze, its still a massive lose. and if the percentage is significantly lower, then its really not doing anything at for the people being impacted. What I would like to know is if this is a bill, how does this impact the secuirties companies that packaged the loans for investors.

Will the government protect them with some kind of insurance. Cause I for one would be P.O. if I bought one of these securities expecting to make 9 or 10% from it, and got stuff with 5 or 6%. Especially given the fact that after fees its really only a 1 -2% increase, which inflation grows on average of 3%. Its basically them losing money.


Can someone please explain this to me.

Thanks,

Camain


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[edit on 7-12-2007 by Jbird]

Look, Bush would rather F*ck a horse than not allow the markets to speak. In the UK, we have a mighty .25% drop, they look like they're trying. But they are not, they know the economy has to hit the rocks, and the longer we drag it out, the worse it gets. Time for a futile gesture?