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If freezing ARM interest rates is such a good thing (bailout) for the mortgage lenders then why don't they do it without the government forcing them?
It seems to me that house prices must fall to the point where average wage earners can afford them with a traditional mortgage. For the last few years prices have been propped up by using creative mortgages to allow people to borrow much more than they can afford.
Real estate agents encouraged people to spend more than they can afford by taking out an ARM or sub-prime mortgage with the understanding that they can refinance to a fixed rate before the payments reset too high. This worked fine when real estate prices were rising and buyers had equity to secure the new loan but does not work at all when prices fall. Now they are stuck with payments resetting higher than they can afford and have no chance to refinance.
I have also read stories where real estate agents and mortgage agents coerced appraisers to evaluate houses to match the inflated selling price or they would refuse to do future business with them. It seems like the whole industry was making lots of money with the high commissions. Now we are stuck with millions of house buyers who will have to walk away.
I put most of the blame on the buyers who were talked into these deals by agents looking for high commissions. But real estate agents and mortgage brokers are not blameless for taking advantage of naive house buyers.
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