Posted on: 02nd Feb, 2009 04:28 pm
What are the drawbacks related to reducing every mortgage in the country to 4%? Am I wrong in thinking that this would benefit everyone except the banks that got us into this in the first place? People would be encouraged to buy homes and owners would have less incentive to leave them and the problem would be solved and the responsible parties would pay for it.
Welcome gderman,
I suppose that's not the right solution. I understand what you're trying to say. But if investors were willing to provide the funds, wouldn't the bank go ahead and do business. Of course things got worse after that. But if every bank would reduce their rates to 4%, it would affect the investors who usually buy mortgage backed securities. In fact, if the mortgage industry goes through tough times, it would affect other financial markets as well.
I suppose that's not the right solution. I understand what you're trying to say. But if investors were willing to provide the funds, wouldn't the bank go ahead and do business. Of course things got worse after that. But if every bank would reduce their rates to 4%, it would affect the investors who usually buy mortgage backed securities. In fact, if the mortgage industry goes through tough times, it would affect other financial markets as well.
I don't understand your post. You switch tenses in the 4th sentence. You can't talk about doing something in the future and then say "of course things got worse after that". We are considering a future course of action....what are you referring to? How would the investors who buy mortgage backed securities be affected? Right now they are receiving no interest on their investment because of defaults and if the interest rates were lowered they would start to receive interest again. Sure it is less than they hoped for but that's part of the risk they took. If they hold out for more interest they may get nothing when the US economy tanks.