 Quote:
Originally Posted by emilylynn
I wouldn't hold out much hope for a significant amount of refinancing. After all, these were folks who were unable to qualify for conventional mortgage loans during a period of time that spawned what may have been the loosest lending standards the industry has ever seen. With the specter of governmental interference amounting to nothing less than the large-scale abrogation of private contracts, you can bet that nobody in the private sector is going to be lining up to do business with them again. Lenders will be demanding a premium for not only the risk inherent in making loans to this class of borrower, but an additional premium to compensate them for the risk of entering into contracts with a protected class which may receive special legal protections at any time.
Furthermore, after the government gets through stripping the investment community of their legal rights, there will no longer be a private secondary market for mortgage loans. The availability of credit will be drastically reduced--meaning higher rates for everyone, and the standards imposed by lenders (who will be keeping more of these loans on their own balance sheets) will be much more stringent.
As much disdain as I have for the fraudulent practices of the lenders vis-a-vis the mom-and-pop investors who will ultimately take the hit, I do not believe that the subprime borrowers in this picture were the victims of any similar deception. Since the dawn of time it has been the case that a high risk borrower pays a commensurately high price for the extension of credit. And where an already high-risk borrower requires terms that defer the payment of interest. . . Well, there's nothing too surprising about the fact that there's going to be a day of reckoning. No sympathy here.
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I agree with Emilylynn. Additionally, I think this "bailout" of subprime borrowers will haunt generations to come. The secondary mortgage market will never be the same again. They'll be overly cautious because of the threat of government intervention. What lesson will the children of subprime borrowers who received a government rescue learn from all of this?
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