But a huge of recent loans are adjustable-rate mortgages because of those teaser rates.
In contrast, teaser rates for most prime ARMs typically last for five years.
As those teaser rates end, and without the possibility of refinancing, default rates are expected to rise further this year.
Low interest rates are a godsend to consumers who borrowed at low teaser rates to buy bigger houses than they could afford.
The rules also curtail the use of teaser rates and other ploys for making mortgages appear to be less costly than they really are.
Since these customers typically carry revolving balances, they could turn out to be profitable for Citi once the teaser rates expire in about two years, analysts said.
On Thursday Bush unveiled his plan to freeze "teaser rates" on some adjustable-rate mortgages, to keep 1.2 million borrowers away from foreclosure if they aren't able to make their loan payments once the introductory rate expires.
In the Sun Belt, a surge in population in recent years drove up housing prices, which fell dramatically when the housing market slowed--leaving subprime borrowers in the lurch when they try to refinance before the "teaser rates" expire on their adjustable-rate mortgages.
The Federal Reserve's fundamental blunder in no way excuses the reckless, eye-popping practices of those mortgage bankers who lent money to people without even checking that their alleged incomes were real or who, in effect, gave the wink and nod to dicey borrowers, signaling that when their teaser interest rates were up, they could get new mortgages at new teaser rates.
When we talked a while back, just in the last debate, we talked about the bankruptcy bill, which had been pushed by the banks and the financial institutions, that said, basically, it will be harder for folks who have been lured into these teaser rates and then see their credit cards go up to 30 percent, that they would have a tougher time getting out of bankruptcy.
Significantly, most subprime loans involve low "teaser" rates that last for only two years.
Nearly 2 million households will risk default when the "teaser" rates on their adjustable rate mortgages expire within the next year.
The most widespread problem is mortgages that had special introductory or "teaser" rates that made them more attractive than traditional fixed-rate loans in the first place.
And many borrowers are facing painful payment hikes: According to a First American CoreLogic study, one-third of ARMs taken out between 2004 and 2006 began with "teaser" rates below 4 percent.
Subprime borrowers were attracted by teaser loans, which offered low interest rates in the first two years, jumping sharply over the rest of the loan.
Borrowers bought houses they couldn't remotely afford using exploding ARMs--a 2% teaser rate could jump to 8% within two years, even if market interest rates didn't change.
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