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Tuesday, October 9, 2007

FDIC to mortgage servicers: Freeze ARM rates

October 9 2007
The heat on U.S. mortgage lenders and servicers was turned up a few degrees this week when the country's chief bank regulator publicly proposed that they permanently freeze interest rateson subprime adjustable-rate mortgages (ARMs) for many homeowners. "Keep it at the starter rate. Convert it into a fixed rate. Make it permanent. And get on with it," Federal Deposit Insurance Corp. Chairman Sheila Bair said in prepared remarks at an investor's conference. ARMs often have a low introductory interest rate for two or three years and then reset to much higher levels. Roughly 1.3 million subprime ARMs are due for a rate reset between now and the end of 2008, according to data from First American Loan Performance.


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