No shit... really??? their final maturity is 30 years.... thanks captain obvious.
Again dumbshit.... if you have a mortgage for $300k and the government buys that mortgage for even 50 cents on the dollar... what did the government pay?
thats right.... 150k. If home values dropped by your 50%... then the current value of the property is also 150k (assuming of course that most of these people had no equity, which is probably the case).
So you now hold a $150k mortgage on a $150k property. If a person could afford that $300k at say 3% ARM... they can afford a fixed rate of 6% on a $150k mortgage. Current 30 yr fixed rates avg....6%.
Now on the more desperate loans... they are pricing at 15-30 cents. The math on those also works.
As for the default rate on subprimes... it was only recently that it jumped to a 25% default rate. You are assuming that the default rate will remain that high (actually you are asserting that it will go to 100%). The default rate will go down as the economy improves.
Example.... A person has an original mortgage on $300k at a teaser ARM of 3% (pmt of about $1300) and now that their ARM adjusted to 6% they can't afford the payment of $1800. They are in trouble. If the government buys that $300k mortgage for 50 cents on the dollar and refis it to a $225k mortgage at 6% fixed (payment again about $1300)...... then the consumer should be able to afford the mortgage again... correct? The 6% is the current avg for 30yr fixed debt. The government (if they hold it) gets not only the 6% income stream, but also gains from the capital appreciation in the loan.... more than likely they would turn around and sell the loan.