A token effort to tackle the problem came in the form of a Treasury Department program to help households at risk of default to refinance their loans: the Home Affordable Modification Program.
The move will allow the sister companies to inject up to $200 billion into the mortgage market, enabling homeowners in danger of default to refinance by buying their mortgages.
As those teaser rates end, and without the possibility of refinancing, default rates are expected to rise further this year.Credit cards have been subject to some unusual influences over the past two years, but the result has been historically low, rather than high, default rates.
Though not likely to be aggressive enough — some two million homeowners are now headed for default — the refinancing effort is a good first step.
Prodded by Merkel and the French president, Nicolas Sarkozy, the 16 countries using the single currency agreed a mixture of bilateral European loans and International Monetary Fund help for Greece if it finds itself facing default, unable to refinance its ballooning debt.
Twenty billion of it will be used to give a break to military and the unemployed, reduce principal for delinquent or near default loans and refinance mortgages already underwater.
By lowering the borrowers' monthly payments, refinancing would make default less likely.
The program eliminated Fannie and Freddie's ability to force banks to take losses on loans sold to the government-sponsored enterprises after defaulting and being refinanced through HARP 2.0.
Portugal has already received about 20 billion euros ($28.4 billion) of the bailout financing, which the previous Socialist government requested in April to meet debt refinancing obligations and avoid a default.
If Argentina has trouble refinancing its debt or goes into default, the entire region could be hurt, as happened after the Mexican crisis in 1995 and Brazil's currency devaluation in 1999.
