Are borrowers still making their mortgage payments?

Pardon my ignorance, but this credit crunch isn't being caused by the home buyers who made variable interest rate mortgages not paying their mortgages. Is it? So if the lenders would only ease up on raising the rates to home buyers, they could avoid many foreclosures on homes that are generating capital for the lenders.
What good will it do for the lean holders to foreclose and continue to cut the own throats by driving the property values down even further?
I told you, I'm ignorant, but I knew enough to get a fixed mortgage.

It is being caused by variable interest rates going up to the point where people who were barely able to afford the house they bought can no longer afford to make their payments. Their houses are going into foreclosure, which is dropping a lot of property on the market all at once (which drops the market value of property because the supply is now greater than the demand). And, the banks are getting pickier about who they will finance, which is making it harder for people with mediocre credit to get a mortgage. So, now you have an abundance of houses on the market that are for sale. But, because a lot of people can't get financed, those houses don't have buyers. And, the houses are selling for less than what the loan amounts were for. So, now we have mortgage companies who own a bunch of properties that they can't sell (because new buyers can't get mortgages) and the few that they do sell are barely paying back what the people own. Catch-22.

So, long story short, mortgage companies are land rich and cash poor right now.

And, they did it to themselves. It was a combination of greed on the mortgage companies part by putting people into house they knew the people couldn't afford, not disclosing everything clearly to the borrowers. And, then greed on the borrowers end because they wanted to save a few bucks each month by getting that variable interest rate instead of locking in a fixed rate. Now that it's gone up, they want to whine about it. But, all was fine and dandy when they were getting an interest rate below what the people with fixed rates were paying.

Greed.

A lot of people with variable rates are going to the banks and requesting a refinance and waiving any penalties. The banks do not want another house, and will probably accept their customers requests.

It is being caused by home buyers who were ignorant and got an ARM just so they could get the house they couldn't afford. Now 5 years later their mortgage payment doubles and then what do they do because they can not afford the payments.

They should have gotten a traditional 30 year mortgage in a house they could afford.

The problem is the people. people are buying homes when either they shouldn't be buying one to begin with or are buying one they can't afford. They get a loan that they can barely pay for and when one thing goes bad like a variable interest rate they are screwed and have to foreclose.

First, your are smart enough to get a fixed rate mortgage. Everyone looked into the option ARMs (4 payment options with a potential downward spiral) which were designed for the house-flippers of the world. Everyone borrowed against those and when the adjustable rates started to reset, they found themselves unable to pay the additional (major) payment increases.

I ultimately blame it on the lenders. They did not train their people to benefit the client...just to write business, so they may ultimately sell the loans and be done with them.

FYI...because of this unfortunate situation, it is estimated that there Will be (modest) 2.5 million foreclosures next year. I predict much more, as many people who will/now have more owed on their properties then it is worth, will just walk away... Time will tell.

No, its caused by sub prime lenders overestimating the real estate bubble.
Only 3% of borrowers are in arrears.
Of those only 1.75% are in foreclosure.
The problem is that with the real estate bust, the value of the homes has declined so the company is holding paper with a value less than the loan. A negative situation for them.
Its not the adjustable rate, its the value of the asset as opposed to the amount of debt and the homeowners ability to pay. If the homeowner walks, the company won't be able to get back its investment.
But the mortage companies gave these subprime borrowers too much credit too easily, thats over now.

To be brutally honest it is because lenders were giving out loans like candy. They gave loans to people who in the past would not have a chance to get a loan. On the surface it sounded like a good thing, but has just resulted in an increase in foreclosures.

They did this by doing things such as "interest-only" and 0 down. The problem was that these people were speculating that the house values would continue to rise. Since they did not, and in addition to the interest rate rising these people can no longer afford the mortgage payment.

Lenders do not have a direct input on the interest rates. They purchase(for lack of a better term) money from the federal reserve. The federal reserve board is the group that decides that the interest rates needs to increase, then every interest rate will also go up. If they decide it needs to go down, then other interest rates will follow. Basically if it costs the lenders 3% to "purchase" money, they can't create loans for under 3% and still be able to survive.

the lenders mostly do not own the loans anymore.they were sold in the capital markets(if you have a 401k you may have some in your portfolio)and no one knows who the lenders are anymore. the serviceing company that take the mortage payment cannot change to intrest rate or terms of the loan since they do not own them.Also remember that these loans were risky investments for the people who buy such things and they wont buy them anymore.

The lenders don't raise the rates - the federal government does. Then lenders pass that along to their customers.

First of all, banks can't just magically raise or lower rates. They are determined by the mortgage bond market. Supply and demand. Mortgage companies have to book loans at rate that buyers are willing to invest in.

2nd of all, how can you ever blame a bank when it's the client signature on of the docs. yes, there is a lot of paperwork, but there is so much consumer protection out there with disclosures that you'd have to be blind not see what you're getting into.

We send out Good Faith Estimates with fees and payments listed. We send out one form that discusses the interest rate, payment and possible changes. These come out to the client 3 days after an application is taken and usually gets there weeks before closing.

Then at closing, the same sheets are there for you to compare with the sheets we originally sent out.

There's no reason to blame someone other than yourself if you enter into a commitment you can't follow through with.