The House Financial Services Committee met on Tuesday to discuss possible solutions for the subprime mortgage crisis. In attendance were Federal Deposit Insurance Corporation, Housing and Urban Development, Freddie Mac, Fannie Mae, real estate investors, lenders as well as consumer groups. Almost all in attendance agreed that the best possible solution would be to move “borrowers out of hybrid adjustable rate mortgages - the so-called exploding ARMs - and into fixed-rate loans.”

“Exploding ARMs feature low initial “teaser” rates that reset after two or three years at much higher levels that can run past 10 percent. The payments on fixed rate mortgages stay the same throughout the lengths of the loans.

Ohio Congresswoman Marcy Kaptur, whose state leads the nation in foreclosure rates, was the first panelist to speak and recommended a three-prong approach to loan modification.

• Establish rescue funds for borrowers facing short-term problems caused by illness, layoffs or other one-time events.
• Establish a bond fund to pay for switching borrowers out of unaffordable ARMs. Ohio has already started a bond fund to put subprime ARM borrowers into 30-year fixed-rate loans at 6.75 percent interest.
• Refinance loans for victims of predatory lending. This would involve working with Fannie Mae, the quasi-government corporations.

Such loan modifications would require the co-operation of lenders who would have to be willing to accept lower returns on their investments.”

The complete article can be found at:

http://money.cnn.com/2007/04/18/real_estate/foreclosure_bailouts_/index.htm?postversion=2007041810

Pam