Subprime answer? Fixed rates for ARMs?

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From CNN, a recap of the recommendations made by a panel presenting to the Congressional House Financial Services Committee. Many revolved around modifying ARM loans in to fixed rate loans. Some of the other recommendations:

Establish rescue funds for borrowers facing short-term problems caused by illness, layoffs or other one-time events.

Establish a bond fund to pay for switching borrowers out of unaffordable ARMs. Ohio has already started a bond fund to put subprime ARM borrowers into 30-year fixed-rate loans at 6.75 percent interest.

Refinance loans for victims of predatory lending. This would involve working with Fannie Mae, the quasi-governmental corporation.

While I am not a fan of the "rescue fund" idea, I do think there is some merit to fixing ARMs at their existing interest rates. Many borrowers have successfully made two to three years worth of payments at those rates so they could continue to stay in their homes, the investors would get hit hard on profitability (a good thing) teaching them not to be so lax in lending, and the government doesn’t have to dole out cash by the bucket to help all of these foreclosure victims. I’ll have more later – busy day at the office!