Summary
Long gone are the days of double digit appreciation in home values as money tightens among fears of rising foreclosures. Foreclosures that could have been stopped if the secondary market had not stopped funding loan pools that included sub-prime loans. Now people with 2 and 3 year sub-prime loans do not have an avenue to refinance out of their "specialty" loan and are stuck with a rising interest rate due to the reset terms of their original loans, which by the way increases their monthly payments and in turn causes the borrower to reosrt to defaulting on their loan. So when it comes to losing these so-called "specialty" loans that were created by President Clinton's White House, we are in a sense forcing more people into foreclosure and destroying our economy.
Analysis
Due to increased foreclosures in America and a skittish secondary market to buy loan pools that include sub-prime loans, we are faced with the credit crunch and disappearing specialty loan products. Some of these products are very valuable to a stable economy and growth in other investment categories such as municipal bonds, stocks, IRA's and other investment vehicles. Without specialty programs, like the interest only and payment option ARM we are quickly turning back the hands of time to the days when the only loan product was the fixed rate loan for people with A+ credit. With fixed rate loans the consumer is punished for the entire term of the loan while the bank or lender reaps the benefits of standardized future payments. While many specialty loan products were sold to unsophisticated borrowers that did not understand the best uses of the products for which they had, the discontinuance of these products will do more damage than good in the future of the US economy.
