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Subprime Crisis Affects Mortgage Owners

Struggling borrowers are getting deeper into trouble with the subprime interest rate crisis worsening. As they search for the answer, many have already foreclosed, losing their homes and taking a backward step in their ideal living conditions. So many people continue to try and solve the situation, but in the mean time, many dreams are in ruins.

While borrowers have the option of debt consolidation, the current financial climate is making this almost impossible. Strict conditions on consolidation loans are making it difficult for borrowers to consolidate their debt in an effort to reduce their payments. An increasing number of borrowers are falling further behind on repayments because of the difficult position this situation puts them in. The current talk in financial circles is that subprime mortgages mat have their interest rates frozen, if they are up to date with payments.

there is increasing pressure on the major US lenders to freeze interest rates for borrowers who are currently meeting their payments but may struggle with increases. The action proposed is the freezing of interest rates of those subprime mortgages that were supposed to have their rates adjusted, which usually happens after a one to two year introductory period. An interest rate freeze would prevent an increase in repayments and the borrower would just keep paying the same amount as they had been paying during the intro time.

The proposal will be of benefit to those borrowers who are able to maintain their repayments if they stay at the same amount. The aim is the relief of the mounting pressure on the borrower to manage to keep their mortgage payments up to date. Many home owners are experiencing huge stress in the current subprime crisis, as they continue to stretch to meet their commitments and keep their homes and current lifestyle. This type of action could also give the financial and real estate sectors a much-needed boost, in turn also helping the flagging economy. This forward-thinking plan won’t be able to go ahead unless the major lenders give it their support and cooperate with the government, and investors are watching the outcome.

Many of the lenders were not willing to rewrite at-risk loans and were dealing individually with each case. The government is advising borrowers who are having difficulties with their repayments to talk to their financial institution and see if an arrangement can be agreed upon to avoid foreclosure.

The average introductory interest rate was around 8.5% in 2006 with the loans re-setting in 2008, by which time interest rates were almost 11%. On a $300,000 loan, the repayments would rise by around $500 which is more than many over-extended borrowers could manage. Conditions haven’t changed for mortgage owners.

While still in the planning stages, the length of the time that interest rates could be frozen was not mentioned as the government and leading lenders remained in discussion about the proposal. With the time period of from one to seven years being considered, so many borrowers will be able to relax a little.

Before proceeding with consolidation of debts, research the options fully so you are in a position to make a more educated decision, based on current information.

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