Default or fixed rate mortgages
From consumer loans to installment loans to credit cards and now to interest-only adjustable rate mortgages. The old adage, “If it sounds (looks) to good to be true, it probably isn’t,” is still as true today as it was in 1959 when newspaper headlines read “Never have So Many Owed So Much.” Every week since September, the Business Week magazine has run an article on the housing market. Newspapers run stories each week either focused on families that are losing their housing due to inability to meet changing rates based on the adjustable rate mortgages or focused on the ever increasing mortgage defaults on the side of lending institutions. Alan Greenspan has already warned that the housing fallout will impact other areas of the economy and he “puts the odds of a recession by the end of the year at one in three.” (according to a New York Times article.) Wouldn’t it just be smarter for banks to leave the interest rates alone, or rewrite the loans at a fixed rate. This way families can continue to make their mortgage payments and banks don’t have to worry about default loans. This seems like a win-win situation to me that would help the overall economy and prevent a further recession.