Adjustable Rate Mortgage Rescue Plan Outrage

If there is one thing that frustrates me, it is watching stupidity get rewarded.

People who purchased homes on a mortgage which had the possibility of interest rates that could skyrocket to over 10% annually, and who had that possibility come true — and who were fully aware of that possibility going in — should be responsible for their own stupidity and/or gullibility.

Instead, mortgage companies are saving them from foreclosure by "playing the nice guy" and changing the rules on these mortgages, and giving these people new, low interest rates; in many cases interest rates much lower than people who opted for "safe" fixed-rate mortgages.

Of course there are one hundred reasons for the financial institutions who granted these loans in the first place to change the rules halfway through the game... but the one reason to be against it — rewarding stupidity — is the only one I'm thinking about right now.

Not everyone is happy about mortgage lenders' latest efforts to help troubled borrowers.

Take Teresa Nelson. Instead of going for an adjustable rate mortgage with its lure of low initial rates, she opted for the security of a 30-year fixed at 7.10 percent for a house she bought in Pinellas Park, Fla. in December, 2005.

"I was well aware of what an ARM meant, and was staying far away from those snake-oil pipe-dream promises," Nelson said. "I also wasn't shopping for a short-term, big payoff investment - I was looking for my home, until I retire."

But many delinquent subprime borrowers who went for low teaser rates that shot up to unaffordable levels are now paying lower rates than Nelson as part of a new round of foreclosure prevention packages. And she doesn't like it.

For example, one subprime borrower had a riskier hybrid adjustable rate mortgage (ARM) with a rate of just under 7 percent that was going to reset in December to 10.5 percent. But last month, as part of a new bailout plan from Countrywide Financial, the lender gave him a rate reduction to 5 percent on his loan, saving him hundreds of dollars a month.

Nelson feels cheated and has little sympathy for people who she believes weren't as careful as she was. "Everybody was seeing dollar signs," she said, "and let their greed get the better of them. So, no. No bail-out, no assistance with my tax dollars. Not one red cent."

Exactly.