Share on Google Plus Share on Twitter
Share on Facebook
Share on LinkedIn Share on PInterest Share on Fark! Share on Reddit Share on StumbleUpon Tell A Friend
Printer Friendly Page Save As Favorite View Favorites View Article Stats
1 comment

General News

Debunking the Right Wing Case Against Fixed-Rate Mortgages

By (about the author)     Permalink       (Page 2 of 3 pages)
Related Topic(s): ; ; ; ; ; ; ; ; , Add Tags Add to My Group(s)

View Ratings | Rate It

Headlined to H2 1/11/13

Government Must Jettison the 30-Year Mortgage

[The reason why Barry Ritholtz says Pinto is "batshit crazy" is because of the ludicrous way he cherry picks facts to conform to his own biases.) 

Alex Pollock, Before He Hewed To the Party Line

It wasn't always so. Money talked in September 2007, when Alex Pollock,  a resident fellow at the American Enterprise Institute, took note of what  $10.5 trillion in residential mortgage deb had to say. Testifying before the Joint Committee of Congress, which convened a hearing on "The Subprime Lending Disaster and the Threat to the Broader Economy, " he focused on the numbers: 

 A systematic regularity of mortgage finance is that adjustable rate loans have higher defaults and losses than fixed rate loans within each quality class. Thus we may array the serious delinquency ratios as follows:

  June 30, 2007 

Prime fixed 0.67%      Prime ARMs 2.02%

FHA fixed 4.76%         FHA ARMs 6.95%

Subprime fixed 5.84%   Subprime ARMs 12.40%

The particular problem of subprime ARMs leaps out of the numbers. Also notice that FHA and subprime serious delinquency ratios for fixed rate loans are not radically different. The FHA is predominately a fixed rate lender, whereas subprime is about 53% ARMs. The total range is remarkable: the subprime ARM serious delinquency ratio is over 18 times that of prime fixed rate loans.

Source: Mortgage Bankers Association

In the years that followed and in the years that preceded Pollock's testimony, one metric in the mortgage has remained constant; Over time, ARMs always perform worse than fixed-rate loans by a lot.

Source: Federal Reserve

Lewis Ranieri's 35 Years Of Experience

Next Page  1  |  2  |  3


For over 20 years, David has been a banker covering the energy industry for several global banks in New York. Currently, he is working on several journalism projects dealing with corporate and political corruption that, so far, have escaped serious (more...)
Share on Google Plus Submit to Twitter Add this Page to Facebook! Share on LinkedIn Pin It! Add this Page to Fark! Submit to Reddit Submit to Stumble Upon

The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.

Writers Guidelines

Contact Author Contact Editor View Authors' Articles

Most Popular Articles by this Author:     (View All Most Popular Articles by this Author)

Fatal Flaws In The Lawsuit Against Fannie Mae Execs, Part 2

Mortgages, Ed Pinto, And A Vast Conspiracy Of Silence

How Paulson's People Colluded With Goldman to Destroy AIG And Get A Backdoor Bailout

How Niall Ferguson Invented False Quotes By Paul Krugman

Fannie Mae "Accounting Scandal" Discredited In Court

The Bush Tax Cuts And The Republican Cult of Economic Failure


The time limit for entering new comments on this article has expired.

This limit can be removed. Our paid membership program is designed to give you many benefits, such as removing this time limit. To learn more, please click here.

Comments: Expand   Shrink   Hide  
1 people are discussing this page, with 1 comments
To view all comments:
Expand Comments
(Or you can set your preferences to show all comments, always)

Thanks for the entertaining and most appropriate q... by B Yting on Friday, Jan 11, 2013 at 6:57:44 PM