dullard
Elite Member
- May 21, 2001
- 26,066
- 4,712
- 126
No one knows exactly what will happen. But there are some things that are likely to happen.
Notice that things soar soon and hit a plateau right around October. It doesn't get much worse after that, but it doesn't get better either. So by the end of the year we will know roughly what we will be dealing with.
1) Some of those people will be just fine. I'll be one of them. But my ARM resets a bit later than on that list. However, by the time my 5-year ARM resets, I'll have the house virtually all paid off. So the increase in interest won't be more than a blip on my budget.
2) Some of those people will struggle but be just fine. They will cut spending elsewhere to make up for spending more on interest. Expect retail stores to take a small but significant hit.
3) Some of those people will refinance. They'll take a bit of a hit, but hopefully they will get into a mortgage product that better suits them.
4) Some of those people will enter foreclosure. Their houses will be taken away and sold. This tends to have a depressing force on the local area housing prices. Look at Detriot for an extreme case. An empty house is an invitation for problems (local crime, unkept lawns, etc).
We will have a mixture of all of those effects. What effect dominates is yet to be seen.
Yeah, I am asshattish, yet again with the name calling. It's quite pathetic that you have nothing else. Keep coming. Perhaps you'll push me far enough I'll threaten to get you banned, just like you did to me.
I never said the Fed wouldn't cut rates without the caveat about inflation. If I excluded it you can look at any other of my posts on the subject and see that. Naturally, you won't, because you refuse to address points and would rather just attack away.
ultimatebob
Lifer
- Jul 1, 2001
- 25,134
- 2,450
- 126
Originally posted by: Demon-Xanth
Originally posted by: JEDI
what? why were 80/20's canceled?
it was a sweet loan as well.
no $ down, 80% 1st loan, 20% 2nd loan (at a little higher interest).
and you didnt even have to pay the 20%. (and my loan had no late penalties.)
Just pay the minimum on the 80% and the bank is happy. they're not going to foreclose if you miss the 20% part.
But are 80/20's gone by law, or because you dont have the credit rating?
They're going away because banks don't want to take the risk.
Or, they're sick of running into people like JEDI who don't pay off their second mortgage
ultimatebob
Lifer
- Jul 1, 2001
- 25,134
- 2,450
- 126
Both Flip THIS House and Flip THAT House seemed to have semi-professional property renovators that always seemed to make good money on their houses. Of course, they always made it LOOK that way anyway! They would often end the show with some Realtor making an overblown appraisal of what the house MIGHT sell for after the renovation, rather than what it actually sold for.
Property Ladder always has dumb newbies with no experience doing home renovations, though. I liked that show the best, since those folks usually go WAY over schedule and over budget like most flippers do. They usually end up making practically no money on the deal when it takes months to sell their house far below their original asking price.
Property Ladder also factors in carrying costs and realtor's fees, which the other flipping shows seem to ignore.
They might not have equity in a house, but they would have cash with a value greater then the equity they would have in a house that was 100% financed. If the money was invested, the difference could be even greater.
alkemyst
No Lifer
- Feb 13, 2001
- 83,769
- 19
- 81
Adding more and more to the paperwork is not going to be the answer to stupidity. If someone doesn't know WTF they are signing or even bother to read it then it's on them.
Personally I am tried of the govern't bailing out all the idiots. I say let them suffer in their mistakes. Especially those thinking they'd get rich quick buying up junk and covering up problems with the places.
You will still have those that bank on things going down. Only poor brokers would not disclose the risks. Even with those disclosure changes, it would make it easier for those brokers to basically lie.
again though people are going to assume best case instead of worst case.
Right...so we now police the stupid? Hire an attorney to handle one's transaction. Just like everything else in life, being stupid should cost one more. However; what is happening now is the non-stupid are supposed to foot the bill.
alkemyst
No Lifer
- Feb 13, 2001
- 83,769
- 19
- 81
It's more than two numbers.
Lets assume we plot the full possibility of an ARM with just the worst case adjustments each year.
You now have a table that is about as likely to happen as the rates always going down.
Those same customers are now going to assume they are looking at no where near those payments, when very well they could be...even if for a few years.
Along with this there is also a call for counselling, more descriptions in the paperwork, etc.
The solution is to require an attorney...if one elects not to retain one then anything they 'misread' is on them.
The funny part of it all is the disclosures are pretty complete as it is, if one would read them.
Also if anyone can't figure out what a percentage of a figure means when there is no restriction that they cannot use a calculator, there is no help for that person. They should have someone else handle their money.
What's going on in the market right now was that people were playing liar's poker to get in, now they are playing liar's liar's poker to get out...claiming they had no idea.
We still get loan requests from people asking 'can you please tell me what income I need to input on the application to go stated on a $xxx,xxx property?'
We also get a ton of people saying since X company offers a conventional loan at X% (20% down, 1 origination and 2 discount points) that we should be able to beat that at 0% down...no points.
Linflas
Lifer
- Jan 30, 2001
- 15,395
- 78
- 91
I'm not sure how anyone can walk out of a closing not knowing exactly what all the terms are. Since we purchased our first house in 1989 everytime we go in to settlement for a refinance or when we purchased a new home in 1996 the paper work we have to sign increases and 99% of it is government mandated disclosures about various pieces of the transaction including at least 3 or 4 different ones regarding the interest rate and total cost of the credit being extended.
dullard
Elite Member
- May 21, 2001
- 26,066
- 4,712
- 126
I think you are way, way, way overexaggerating what I said I wanted. You must be talking about someone else, somewhere else. So either please link us to who you are responding to, or comment on my thoughts.
Let me reiterate my thoughts.
[*]Suppose a buyer is interested in getting a 3-year ARM.
[*]Suppose the ARM is fixed at 6% for the first 3 years.
[*]Suppose the mortgage is for $200k.
[*]The monthly payment will be $1199.10 for the first three years (plus escrot).
[*]That is all included in the disclosure, and that is all good.
[*]Suppose the ARM is indexed to the 1-year LIBOR average (5.245% currently).
[*]Suppose the ARM is set to be 2% above that LIBOR average.
[*]Suppose the cap is 2% movement in interest rates per year.
Thus, after 3 years assuming the buyers paid everything on time, there are several possibilities:
1) The LIBOR average stayed the same. In this case, even though the LIBOR didn't change, the interest rate becomes 7.245%. Monthly payments become $1352.93. This is something that most people don't know. Even though the LIBOR was unchanged, their payments go up over $150/month.
2) The LIBOR average could fall. In the most extreme case, the ARM interest rate becomes $970.38 at the reset.
3) The LIBOR average could rise. In the most extreme case, the ARM interest rate becomes 8% at the reset. The monthly payment becomes $1450.01.
So the table would look like this:
That is it, nothing more is reasonable to put on there because it includes far too many assumptions. That would be an impossible forecasting result. But the buyers will see front and center that in most cases, their payments are going to go up. Even if the LIBOR stays the same. That latter point is lost on almost all buyers.
This isn't a call for counselling, it isn't really much more paperwork, it isn't an attorney with massive extra costs attorneys bring. You are right, someone else should handle the paperwork and explain it to the buyers, and that person ideally would be the broker. But people leave the broker not understanding what really will happen to their payments.
alkemyst
No Lifer
- Feb 13, 2001
- 83,769
- 19
- 81
First your quote is "Why are you fighting so hard against putting two numbers on a form?"
What you have explained above is more than just two numbers. Also that situation is a very simple one.
If someone doesn't understand that fixed for the first three years means after that it will change. I don't think there is nothing else you could explain to them to help them understand that.
Also like I have said no matter what you tell these types of borrowers they are going to look at the house always going up and their rate always going down.
Vic
Elite Member
- Jun 12, 2001
- 50,422
- 14,337
- 136
See, this is my thinking exactly. You have to sign your name at least 100 times and the documents outline the terms of the transaction precisely and in clear and simple English that anyone with even a basic high school education should be able to understand.
And if the loan is an ARM or if it has differing amortization terms (like interest-only, balloon, or neg-am), then there is an additional package of disclosures to be signed fully outlining all the details along with required instructional/educational material.
If the loan is a purchase, then the borrower has the legal right to be able to review all of the documents 24 hours prior to closing.
And then if the loan is a refinance, the borrower is given 3 full business days after closing with which to review the documents and the option to cancel -- at absolutely zero cost to them, even previously paid deposits have to be refunded -- should they choose to.
And all that after 4-6 weeks of consultations and process and documentation and disclosures and estimates and required educational booklets, and FFS sometimes I think whole forests are cut down for a single transaction.
And STILL some people say they don't understand. I just don't get it. Understandably, some brokers are sh!theads and not in full compliance, but there's no escaping the volume of paperwork at closing.
alkemyst
No Lifer
- Feb 13, 2001
- 83,769
- 19
- 81
most people I have asked did not read any of the paperwork save making sure their rate was correct.
If a broker is acting maliciously, no matter what extra paperwork is involved...there is no way to fix that situation except for those that read.
People spend more time going over used car paperwork than the papers they sign on a values several multiples of that in time and money.
Demon-Xanth
Lifer
- Feb 15, 2000
- 20,551
- 2
- 81
That's particularly sad given that if they didn't require signatures in more than one place most people would spend as much time on the paperwork there as they do buying a TV at Walmart.
dullard
Elite Member
- May 21, 2001
- 26,066
- 4,712
- 126
Oh, no you caught me. 3 extra numbers, not 2. My bad, and I am sorry.
$1199.10 is already on there. Add $970.38, $1352.93, and $1450.01. Yes, it is simple to do. So why won't you do it for your customers?
They understand that it is fixed then it will change. They DON'T understand how much it may change. Yes, it is described to them in words using complex definitions and indicies that they know nothing about. But in addition, just give them the range that it will change on the first change. Then they can understand what type of benefits and risk they are looking at.
You've got to be kidding. All customers, all the time? Your customers maybe. But a good broker won't have that happen. There are customers who will look at both extremes. There are customers who are conservative in their finances and will take the worst case scenerio. There are customers who only need the math done for them and who aren't idiots. To assume they will all assume interest rates will only go down is so short sighted, and so rediculous, that I wouldn't recommend anyone go to you.
Flip This House actually is the fake on
. It's been proven that the "flippers" on Flip This House, outside of Trademark Properties, did not do all the rehab they claimed to do, didn't actually sell some of the houses... hell, the Atlanta Company didn't have RE licenses and hired actors to "buy" the house.Trademark Properties has a pending lawsuit against A&E, and now have their own show on.... whatever channel Flip That House is on.
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