Why dont home lenders freeze interest

[brokeNconfused]

I was wondering why they dont just freeze or lock the rates on their home loans? seems it would have saved a lot of headaches. I have an arm that kicks in on june 2011. need to refi before then, but think locking would be best for all lenders.

[justbroke]

I was wondering why they dont just freeze or lock the rates on their home loans? seems it would have saved a lot of headaches. I have an arm that kicks in on june 2011. need to refi before then, but think locking would be best for all lenders.

Because the loans are highly "securitized". That is that, they bundled the loans, and sold them to investors. The investors bought them on the premise that the loans WOULD adjust to higher percentage rates.

This is exactly why we're in the housing mess that we're in. The Adjustable Rate Mortgage combined with the Interest Only loan (rider), has caused so many people to no longer be able to afford their mortgages.

Having wrote that, some mortgage servicers will allow a Modification to your loan to a fixed rate.

[BigJohn]

I see no real reason for the lender to freeze rates. They are in the business to make money. If they fail, the government (taxpayers) bail them out. If we fail, we a taxpayer, might find out what 'getting the shaft' is all about.

[brokeNconfused]

hmmmm i have never thought about approaching my lender. Too bad its the same one I had my car loan (gave it back) and credit card (stopped payments).. both now included in my 13.. cant imagine they would say YES to a modification.

[NowImDownInIt]

It would be nice though if that was built into Ch. 13... Locking the rates, I mean, because they can take a car payment and lower the interest rate... it would just be helpful.

[justbroke]

It would be nice though if that was built into Ch. 13... Locking the rates, I mean, because they can take a car payment and lower the interest rate... it would just be helpful.

Actually, the new law allows the Court to do that. When the Foreclosure Prevention Act of 2008 was passed, it now allows to "modify" the rights of holders of mortgages on primary residences.

The old Bankruptcy Code didn't allow it, and Banks fought tooth and nail. The main objection to Chapter 13 plans before July 31, 2008, was that the Plan "attempts to modify the rights" of the mortgage holder.

We'll have to see how it all works out, because it's VERY new law.

[chloe0724]

Just Broke,

I just did quite a few searches for the Foreclosure Prevention Act of 2008 and it not once referenced anything about modifying your mortgage while in a 13. Can you please give us a link.

Thanks

[epiphany]

Changing the Bankruptcy Code to allow a judge to modify the mortgage of a debtor. Title IV of S. 2636 would help more than 600,000 financially-troubled families keep their homes by permitting a bankruptcy judge to modify their mortgages. S. 2636 would eliminate a provision of the bankruptcy law that prohibits modifications to mortgages on the debtor’s principal residence for eligible homeowners. Homeowners would be required to pass a means test to verify their inability to pay off the current mortgage and only nontraditional and subprime mortgages already originated as of the date of enactment would be eligible for modification. Judges would be allowed to reduce interest rates to the prime interest plus a reasonable premium for risk and would be prohibited from extending the life of the loan beyond 30 years. Moreover, the bill would provide that if a family sells their home within five years of the mortgage modification, the lender would receive any increase in market value up to the original loan amount.

http://democrats.senate.gov/dpc/dpc-new.cfm?doc_name=lb-110-2-35

and

http://www.house.gov/apps/list/press/financialsvcs_dem/press050808.shtml

ep

[chloe0724]

I thought that part didn't get approved.