Will lenders freeze ARMs?

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Good morning. A while back we posted on a speech in which the head of the FDIC encouraged lenders to freeze adjustable rate mortgages so that homebuyers won’t have to worry about higher payments. That idea lives on: The New York Times editorial page, which we consider to be as influential as any left-of-center institution in America, this weekend strongly endorsed the little-noticed FDIC proposal:

After arguing the economy needs to be ‘rescued’ from the mortgage crisis, the Times writes, ‘Fortunately, the Federal Deposit Insurance Corporation has come up with such a solution. It has made a compelling case for freezing the introductory rates, typically 7 percent or 8 percent, on the most default-prone adjustable-rate loans. To qualify, a borrower would need to live in the home, be current in monthly payments and not yet have faced an increase in the loan’s rate. The plan would remove up to 1.75 million people from the ranks of future defaulters.’

The idea raises numerous questions, which we’ve posed before -- not the least of which is fairness. Why should lenders cut a break to borrowers who chose a risky mortgage? Leaving aside that question, we thought the Times editorial was newsworthy: The N.Y. Times is a ‘thought leader,’ particularly within the Democratic Party, which could soon control the White House and both houses of Congress.

Thoughts? Comments? E-mail story tips to lalandblog@yahoo.com.