| Savings and loan crisis cost taxpayers too much
Economic bubbles that burst get government bailouts. That's historically the way it's worked. The need to stabilize the farm banking system was given as the reason for the mid-80's farm aid. The savings and loan crisis cost taxpayers far more than deposit insurance could cover. Today, it's the Adjustable Rate Home Mortgage bubble that has burst and the Bush administration is attempting to cushion the blow with a plan to help borrowers refinance. 1.8 million ARMs reset to higher rates this year. The Bush administration worries that as many as 1.2 million of these are at risk of foreclosure without help. As was the case with the 1980's farm crisis, the government's plan doesn't bail out banks directly. The mortgage industry will lose $150-400 billion as a result of subprime mortgage losses.
Wayne Swan pledges home loan aid
FEDERAL Treasurer Wayne Swan has promised to find ways to help borrowers more easily switch lenders if they are unhappy with their home loans. All major banks last week ignored warnings from Mr Swan and lifted their variable home rates in response to higher funding costs related to the global credit crunch sparked by the US sub-prime mortgage crisis. The banks acted ahead of any decision to lift official rates by the Reserve Bank of Australia. The RBA next meets on February 5 and is strongly tipped to lift official rates 25 basis points to 7 per cent. The ANZ and St George banks lifted their rates by 0.20 per cent, a move labelled "excessive" by Mr Swan. The Treasurer said he was examining how to make it easier for mortgage holders to refinance.
Minorities in US hit hardest by housing crisis
In May, Alvin Clavon received a foreclosure notice on the simple, Spanish-style house in South Los Angeles that he shares with his wife and three boys. Clavon bought the place in 2003 with a fixed-rate loan. They painted the walls, fixed the yard and made friends with the neighbors, who let the Clavon boys pick their basil. In 2005, worked with a mortgage broker to refinance his home with another fixed-rate loan. But on the night before signing, the family was offered an interest-only, adjustable-rate mortgage. Clavon, a 35-year-old executive assistant at a bank, said he felt stuck. The ball was rolling, he trusted his broker and so the next day, he signed the loan. "Turned out to be the worst thing I could have done," said Clavon, who like so many others in danger of losing their home to the U.S.
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