Finally: A RE blog gets some respect

This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.

No, it’s not this blog -- It’s Diana Olick’s Realty Check blog at CNBC.com. As Diana and her legion of followers were debating this week whether it makes sense for lenders to freeze rates on some mortgages, surprise, surprise: A top federal regulator spoke up on Diana’s blog, explaining the administration’s thinking on the topic.

The regulator is FDIC Chairman Sheila Bair, and here’s part of what she blogged: ‘My loan modification proposal targets a specific set of borrowers: those that are in subprime hybrid adjustable rate mortgages (2/28s and 3/27s) who have been current on their payments at the starter rate but are unable to make their resets. If it is determined that they can make the reset payment, then they will be bound to the terms of their contract. Because of weak underwriting, however, we believe that the overwhelming majority will not be able to make the reset, which typically results in a payment shock increase of 30 – 40%. The FDIC currently estimates that 1.2 million borrowers who are facing resets in the next five quarters may be eligible for this proposal.

More: ’One last important point I would make is that this category of borrowers is typically already paying between 7 – 9% at their starter rate. This is well above prime rates for a typical 30 year fixed mortgage. The vast majority of borrowers who took the conservative route will still be paying a lower interest rate than the targeted borrowers receiving this modification.’

A big, unanswered question: Is the plan now being worked out between Treasury and major lenders the fundamentally the same as Bair’s plan? The White House, ever vigilant in shedding light on financial policy decisions crucial to millions of Americans, said this morning it would be premature to discuss any of this.

Your thoughts? Comments? Insights? E-mail story tips to peter.viles@latimes.com