Why does the govt control interest rates?

1. Shop around. The first place you try is rarely the best. If you are refinancing, your current lender should be the last resort, not the first place you go. Let each lender you interview know you are shopping around.
2. Be sure you understand all the details about whatever interest rate is offered. If it is variable, be aware of when and how much it might increase in the future. Get it all in writing.
3. Be fully aware of all added costs that may be associated with the loan, such as application fees, appraisal fees, title insurance, land transfer tax, attorney fees, etc. Take these into consideration when comparing interest rates.
4. Remember that the lender wants your business as much as you want the loan. Do not be initmidated or think the lender is doing you a great favor just by talking to you.
5. By all means, look over the following web site:
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   is an excellent place to get useful information about mortgages, mortgage brokers, interest rates, and such. It is an academic site for information purposes and does not try to sell you anything or get you to sign up for a loan.

This very short "just the facts" article packs an amazing amount of punch. Well done, Joe.

Imagine yourself a lender. You can sell all of the mortgages you want to and pass them off to Freddie & Fannie. You get your 6%, or whatever, and your scott free. That's what happened. Would you do it?

You have an odd definition of scott free. I keep hearing that the banks didn't have any skin in the game. So why do they have 3rd degree burns over 80% of their bodies?

Xho

What you describe above is a specific criminal activity which nobody condones and for which there are legal remedies that lawyers will enjoy for some time .

While I don't doubt that there were such instances, my opinion is that going from isolated instances to insinuating widespread evil lending practices is an irrational stretch.

-HW "Skip" Weldon Columbia, SC

Fair enough. I have some homework now. I need to uncover the data that shows some relevant details about the mix of mortgages and which ones fall into which category. While my initial response offers a bit of an exaggerated example, I hope we can agree that a loan based on current income, but a teaser rate that can only go up may not be technically criminal, but it was unethical. $400K interest only, 2% teaser = $667 payment $400K 2% teaser, amortizing = $1478 $400K 4% rate = $1910

I don't know what portion of subprime loans were written that blew up for the difference in the numbers above. Homework. Joe

Some people suggest the market should control rates. In recent decades the Fed Reserve interest rate adjustments have trailed short term market rates changes more often than not, suggesting the market sniffs out inflation or recessions better the the Reserve Chairman. The most egregious case was Fed inflation rate increases well into 2007 when the market said the opposite.

(I dont know enough to offer my own opinion)

I'm reluctant to call it unethical on its face. It is certainly risky for all involved, but if the parties involved are informed and willing, I don't see it as unethical.

True, too often, the parties were not fully informed, sometimes woefully ignorant. At some point, a naive mortgagee facing a sophisticated mortgage broker can become unethical, but I don't see a bright line.

-- Doug

ISTM when one goes case by case, determining the line for the purposes of identifying unethical conduct can be very easy. It will be fuzzy or super clear. Fuzzy = not enough evidence to be deemed unethical or illegal. Super clear = jerk preying on the ignorant, which as we know, can have effects on us all. We are all in this together, as the recent crash shows, after all.

Given that only about 27% of the age eligible population has a college degree, and even fewer have education in financing, I would give the benefit of the doubt to the theory that many are taken advantage of and regulating laws are entirely appropriate. At least as long as we want a health working class to staff our factories, make our products, and so keep our stock values high.