You think the housing market is in trouble now ?

pmcollectour

Just wait for this to kick in

secondrepublic

interest rate re-sets on adjustable mortgages will not be a big problem... so long as interest rates stay very low.

pmcollectour

<< <i>interest rate re-sets on adjustable mortgages will not be a big problem... so long as interest rates stay very low. >>



Are you sure ? Aren't these loans set up so that people pay a fixed rate mortgage (5%) for the first couple of years, and
then it automatically switches to an arm (8%+) after the grace period ?

gdavis70

It switches to the LIBOR (most often) + 1

I got a 5/1 adjustable in 2004 at a starting interest rate of 4.5 which I loved... everyone was cautionary and I was cognicent of the risks. But rates were low 6's iirc.

Rates went down and I chose not to refi because of NY's 2% transfer tax. So my first reset came in 2009 and my rate went from 4.5 to 3.25. Happy day, 300 a month back in my pocket.

This year my reset brought my rate down from 3.25 to 3.15. Now I know the Fed has been keeping the rates down to stimulate and that it can go the other way. But these contracts have limits on the adjustment per year. (2% in my case) and they have a max (8.5 in my case).

Even if I notch back up to 8.5 I have had at least 8 or so years paying sub 30 yr market rates. Not a bad deal and nothing to be afraid of.

The adjustables that people should be afraid of are the ones where the payments are lowered such that no principle need be paid on a monthly basis. These are insanity.

DrBuster

Our ARM on the 20 or our 80/20 just reset last month. Was at 5.75 and is now at 3.15 for the next year. Go figure, and we'll take it vs refi.

percyb

<< <i>interest rate re-sets on adjustable mortgages will not be a big problem... so long as interest rates stay very low. >>



This is true on many of the mortgages. Some of the mortgages had interest only payment set-ups though. I believe owners will have to pay principle along with the interest on the resets, so it may cause the problems this doomer alludes to, but maybe not quite to the extend he suggests.

johnny9434

this wont be pretty in the least bit all . not good at all

mrearlygold

My Family was in the automobile business back in the 1960's and 70's. There's several categories of customers in that business . Many people bought cars outright in those days or when they financed they financed at their own banks. Then the next tier of customer needed to finance with one of the big lenders. They had a slightly higher rate but still acceptable. Then there was a tier of customer that would never seem to have a trade in they owned, or enough capital to purchase outright, and there most important criteria for selecting a car was "what's the monthly payment"? That was the guiding principal behind the purchase. Those people never seemed to have equity in anything and have spent their lives chasing the interest rate on their newer cars to show off to friends.

Fast forward almost 40 years and the same thing has happened in the real estate market. The one thing that was a bedrock of freedom and financial stability has been reduced to "whats the monthly payment".

Meanwhile, I have customers who came to this country with nothing. Barely speak the language and settled in of all places California which of course has been very expensive and the few customers that I have who are in this category, ALL started off with little tiny places that they worked their butts off to pay off, now live mortgage free and can buy and sell most of the people in the country they came to with hat in hand and little in pocket. They refused to give their lives away to interest payments.

The housing market will never be the same because the mind-set behind property rights and ownership has been radicaly changed to resemble foreign countries where land ownership is not an option and where people pay their entire lives convincing themselves they own but in reality they will never own and this is the point I don't believe will ever change back.

roadrunner

interest rate re-sets on adjustable mortgages will not be a big problem... so long as interest rates stay very low.

Agreed. I think a few years ago everyone expected rates to go higher and for these resets to be a huge problem. They may not be. As long as rates can be held artificially low, the crawling economic recovery will continue.

roadrunner

DrBuster

<< <i>My Family was in the automobile business back in the 1960's and 70's. There's several categories of customers in that business . Many people bought cars outright in those days or when they financed they financed at their own banks. Then the next tier of customer needed to finance with one of the big lenders. They had a slightly higher rate but still acceptable. Then there was a tier of customer that would never seem to have a trade in they owned, or enough capital to purchase outright, and there most important criteria for selecting a car was "what's the monthly payment"? That was the guiding principal behind the purchase. Those people never seemed to have equity in anything and have spent their lives chasing the interest rate on their newer cars to show off to friends.

Fast forward almost 40 years and the same thing has happened in the real estate market. The one thing that was a bedrock of freedom and financial stability has been reduced to "whats the monthly payment".

Meanwhile, I have customers who came to this country with nothing. Barely speak the language and settled in of all places California which of course has been very expensive and the few customers that I have who are in this category, ALL started off with little tiny places that they worked their butts off to pay off, now live mortgage free and can buy and sell most of the people in the country they came to with hat in hand and little in pocket. They refused to give their lives away to interest payments.

The housing market will never be the same because the mind-set behind property rights and ownership has been radicaly changed to resemble foreign countries where land ownership is not an option and where people pay their entire lives convincing themselves they own but in reality they will never own and this is the point I don't believe will ever change back. >>



I agree with this post. I've been around the auto industry my entire life (thanks Dad and uncles and family friends), almost 40 years.

Some folks should always be renters. Some folks will always have a car payment. The housing shift has been in the past 15 years or so, and that interest only mortgage loan scam/ponzi marked a hard mindset shift I think. Thinking, expecting, then being dumbfounded when the reality of small rental prices on a very real large mortgage come circle is just ridiculous.

I'm glad folks are having to at least put 2-3% down now. Used to be folks scratched and saved to get at least a 10% down.

ranshdow

Freddie, Fannie, and that other one (not Ginnie, FHLsomething) should be abolished. Noone should be able to buy real property with a 3% down, certainly not when the taxpayer's subsidy is what's making it possible (NOT the free mkt). Have we not learned our lessons?

If you (you... not your parents) can't come up with 20% down, you shouldn't be buying property. You haven't demonstrated the ability to enter what has been historically, when fully amortized, a 30-year commitment. It distorts the market, leads to a massive misallocation of resources (legion of realtors!) and increases costs for everyone to the benefit of those who can lend more than they have on deposit. Stop the nonsense.

Bear

Interest rates can not be artificially held down indefinitely.

The Government prints money and then uses the money to buy

Government Bonds. Thus they insure that the bond issue is over

purchased, bond prices keep increasing and the interest rates keep

dropping. Short term rates are being kept low with almost zero Fed

rates. The low rates ,allow the Government to keep interest low of

Government debt.The people being screwed ,are retirees who depend on

interest on their money. Inflation is being criminally under reported with

cooked numbers, unemployed numbers are being under reported so people

do not freak out.National debt and obligations are already beyond the Nations

ability to repay. As a Nation and a people, we are barely able to pay the interest

on public and private debt let alone pay off the principle.All in all, a day of financial

judgment must surely come, that will be sooner rather then later. As for my home value

it has returned to its value as of 2005.I suppose it could be worse and I am fairly confident,

that it will be.

57loaded

this all depends on the terms of the loan. some of these were going to convert to an already set interest rate and whatever the principle is on the loan at the time of the option ARM. the "option" for some of these contracts was for the borrower to pay a minimal amount for a few years with the stipulation of the reset being at a predetrmined/agreed interest rate at close of escrow.

i have seen this scenario happen already.

percyb

<< <i>Fast forward almost 40 years and the same thing has happened in the real estate market. The one thing that was a bedrock of freedom and financial stability has been reduced to "whats the monthly payment".

. >>

Foolish souls. The sickening part was that easy credit was made available because Jesse Jackson and friends demanded it. Now we're all going to pay. Where is Jesse now?

Bear

Individual sense of responsibility and prudence, can not be delegated

to any other person or governmental agency. One must always plan as

best one can ,for the unexpected and unfortunate happenings.While not

every soul may be able to do these things, most can and should, but

do not.

pmcollectour

Bear,


Proverbs 21:20 “There is treasure to be desired and oil in the dwelling of the wise: but a foolish man spendeth it up.” “Treasure” is literally “that which is laid up,” and oil was one of the staples in ancient times, so that the thought here is that the wise person keeps a stock of necessary food on hand in his dwelling at all times so that he has a supply for emergencies, but the foolish person spends all that he has until he runs short even of daily food. Alas, how many people today spend every cent they earn on luxuries and live almost hand to mouth. While one should not make an idol of the pantry, yet it is wise to maintain a supply of extra food when God blesses with abundance. Convenience stores have gotten most people out of the habit of living from gardens. In a severe depression, many would starve in the midst of a plentiful garden because ignorant of how to store and can home-grown produce.

(BTW, this is only a response to Bear, and not intended for anyone else on the forum)

roadrunner

Fannie and Freddie cannot be abolished for at least another 2-3 yrs. Right now they are the official "dumping ground" of all the bad mortgage assets that the big banks and FED want to get rid of...for full 2007 value of course. Since Geithner pushed through the change last December that F&F can absorb an ulimiited/unspecified amount in losses through the year 2012 (previously capped at $200 BILL), they are now the official black hole for anything and everything that needs to get dumped, possibly even "non-mortgage" type illiquid assets. If the FED is removing hundreds of billions of illiquid mortgage securities from its balance sheet, it doesn't take a rocket scientiest to know where they will end up, and who will ultimately take the loss on them. That $200 BILL in losses will ultimately end up in the TRILLIONs. F&F are an ideal place for these "assets" because there is no way to officially audit them.

roadrunner

OPA

<< <i>Interest rates can not be artificially held down indefinitely. >>



True, but that holds also true with most other tangible or intangible items. I started saying that back in early 2008, expecting the rates to start climbing again. Guess what, they've dropped even further since then. Don't underestimate "Big Brother"

cohodk

Japan has kept interest rates low for 20 years. Anyone here prepared for 20 years of low rates?

fishcooker

Japan must be good. When I opened my first IRA the "advisor" said to allocate 25% there for the long term.

CoinCrazyPA

<< <i>My Family was in the automobile business back in the 1960's and 70's. There's several categories of customers in that business . Many people bought cars outright in those days or when they financed they financed at their own banks. Then the next tier of customer needed to finance with one of the big lenders. They had a slightly higher rate but still acceptable. Then there was a tier of customer that would never seem to have a trade in they owned, or enough capital to purchase outright, and there most important criteria for selecting a car was "what's the monthly payment"? That was the guiding principal behind the purchase. Those people never seemed to have equity in anything and have spent their lives chasing the interest rate on their newer cars to show off to friends.

Fast forward almost 40 years and the same thing has happened in the real estate market. The one thing that was a bedrock of freedom and financial stability has been reduced to "whats the monthly payment".

Meanwhile, I have customers who came to this country with nothing. Barely speak the language and settled in of all places California which of course has been very expensive and the few customers that I have who are in this category, ALL started off with little tiny places that they worked their butts off to pay off, now live mortgage free and can buy and sell most of the people in the country they came to with hat in hand and little in pocket. They refused to give their lives away to interest payments.

The housing market will never be the same because the mind-set behind property rights and ownership has been radicaly changed to resemble foreign countries where land ownership is not an option and where people pay their entire lives convincing themselves they own but in reality they will never own and this is the point I don't believe will ever change back. >>



So true.