80/20 gone...

[Vic]

Originally posted by: LegendKiller

Originally posted by: Vic

Originally posted by: LegendKiller

Originally posted by: Vic
edit: Oh, and further than that, I'm not "weeping for their poor judgement," but for your poor judgement in believing that the fallout from this will not affect you.

You have no idea what markets I play in and you've never even asked. Not that I can disclose those markets or the companies we do business with since they are all under confi. However, many of the areas I do business in are defensive in nature. I know that you'd probably like to see me get burned but my career moves are a bit better than that.

I wasn't referring to your own career but your belief (professed many times in the P&N thread by you and several others) that you're going to be able to easily walk right into a house at a cheaper price once all this shakes up as though nothing had happened.

I was just touring an area that I have been looking at and noticed that prices for houses in my range have already fallen by a fair amount. Considering my savings, amount of current debt (all student loans), income, and position, I won't have any problem at all. no 80/20 high DTI for me. Again, your assuptions about my situation are incorrect.

Of course, this only brings up whole new assumptions about your motives, ethics, etc.

Ah, I can see the conversation you'll have with lenders in the future.
You: "What do you mean the rate is 10%? I have perfect credit, large down, income, etc."
Bank: "Sorry, sir, that's my best rate, I don't care if you're Bill Gates."

See yet another of my posts in this thread that you conveniently ignored:
"Let's say for example you get a $300k mortgage at 5%, the monthly payment is $1610.46/mo. Lending guidelines tighten, large downs are required, rates go up, prices fall, and now the house is only $200k but rates are 9% -- your payment is now $1609/mo. and less homebuyers are like to qualify.

Exactly what have you "won"? "

 

[Demon-Xanth]

Originally posted by: waggy
personally i think part of it is they do listen to "experts". well at least the experts on business news and shows like "flip this house" and seeing everyone buying McMnsions.

they think well if he can buy a house for $300k and sale it for $500K 3 months later then it should be worth tons in 3 years before the ARM matures!

then they find out it does not work that way.

i think its a case of "just enough knowledge to be dangerous"

You should watch "Flip this house" again. The last time I watched the show they had three people straight fail to be able to sell the houses they intended to flip. One started living in it, one started renting, and I forget what the third was doing. From what I saw, only 1/3rd of the people who were doing it had any buisness trying to do it at all. The theme of "can't build, can't keep track of finances, can't work with contractors, and doesn't see this as a buisness decision" kept coming up. Many of the people on the show thought it was an easy $200k and ended up stuck holding $3k/mo mortgages and maxed credit cards with a house that wouldn't sell.

When I was looking for a fixer upper, the market for them was overblown because of people like that who wanted to make a quick buck rather than save some cash for themselves.

 

[dullard]

Originally posted by: Vic
That's what the Truth-in-Lending Disclosure is for. You and every other homebuyer who bought with a bank loan has signed one at closing since 1968.

It contains a schedule of payments section, and if the loan is an ARM, then it will show when and how the payment is scheduled to change if the index that the interest is based on remains unchanged.

Yes, but the disclosure is udder crap as it is. It may have worked well in 1968, but it doesn't work well with all of the more complex situations around now.

I've seen several ARM truth-in-lending statements. While you are correct that it does explicitly state how and when it will change, NONE of them have put what I listed above. NONE have said what the monthly payment will be in those situations. I had to take them home, look up a bunch of data, do some calculations (easy for me, but easy for everyone) and only then did I know what the monthly payments will be in various situations.

Yes, you and others are being honest and you are disclosing all that must be done. But far more could be done too. The disclosure forms seriously need to be updated and dumbed down. Don't do it in a way that the important info is missing. But put that info on page 2+. Page 1 should clearly state exactly what the payments could be under various scenerios and in simple English what situations will cause it to go up and down.

 

[eleison]

Originally posted by: Vic

See yet another of my posts in this thread that you conveniently ignored:
"Let's say for example you get a $300k mortgage at 5%, the monthly payment is $1610.46/mo. Lending guidelines tighten, large downs are required, rates go up, prices fall, and now the house is only $200k but rates are 9% -- your payment is now $1609/mo. and less homebuyers are like to qualify.

Exactly what have you "won"? "

While his payment maybe $1609/mon @ 9%, however, as interest rates fluctuates (which I think they are much more inclined to do than home prices), he can refinance when the rates are lower. So if he plays his cards right, he may be able to get a low price on a house (200K) and a lower interest rate --- ultimately

So after all is done and said, with the lower cost of a home, and hopefully a lower cost of his loan, his mortgage my end up to be, if I'm doing my math correctly, exactly $199.01 a month. Yep, the power of buying low and selling high. Patience is a virtue.. working smarter, not hard, etc.....

 

[waggy]

Originally posted by: Demon-Xanth

Originally posted by: waggy
personally i think part of it is they do listen to "experts". well at least the experts on business news and shows like "flip this house" and seeing everyone buying McMnsions.

they think well if he can buy a house for $300k and sale it for $500K 3 months later then it should be worth tons in 3 years before the ARM matures!

then they find out it does not work that way.

i think its a case of "just enough knowledge to be dangerous"

You should watch "Flip this house" again. The last time I watched the show they had three people straight fail to be able to sell the houses they intended to flip. One started living in it, one started renting, and I forget what the third was doing. From what I saw, only 1/3rd of the people who were doing it had any buisness trying to do it at all. The theme of "can't build, can't keep track of finances, can't work with contractors, and doesn't see this as a buisness decision" kept coming up. Many of the people on the show thought it was an easy $200k and ended up stuck holding $3k/mo mortgages and maxed credit cards with a house that wouldn't sell.

When I was looking for a fixer upper, the market for them was overblown because of people like that who wanted to make a quick buck rather than save some cash for themselves.

yeah i watch it on occasion. i take perverse pleasure in watching them fail. Some of the people fail because they have no clue WTF they are doing. they buy a house and want to redo the kitchen, add a bathroom all for $12000! hahahah yeah sure. then they freak out because they are$10k over budget.

 

[dullard]

Originally posted by: Vic
See yet another of my posts in this thread that you conveniently ignored:
"Let's say for example you get a $300k mortgage at 5%, the monthly payment is $1610.46/mo. Lending guidelines tighten, large downs are required, rates go up, prices fall, and now the house is only $200k but rates are 9% -- your payment is now $1609/mo. and less homebuyers are like to qualify.

Exactly what have you "won"? "

It isn't ignored. It is perfectly correct. We all understand it, so I and others didn't think it needed to be commented on.

It isn't the APR that matters, it isn't the price that matters. It is the combo that matters to most buyers. What will the monthly payment be? That is what matters to them.

For most people, the monthly payment will be basically the same before or after the bubble pops/bursts/deflates/whatever. In your example, the buyer doesn't gain anything but his or her own satisfaction of getting a cheaper home (not a cheaper mortgage payment, but a cheaper home).

But therein lies the heart of the difference that I see between you and LK. Your example of a historic low interest rates to a historically common interest rate had the price plunge 50% (if easy credit money disappears). LK says prices will plunge 50%. He just assumes the underlined part will be true.

 

[LegendKiller]

Originally posted by: Vic

Originally posted by: LegendKiller

Originally posted by: Vic

Originally posted by: LegendKiller

Originally posted by: Vic
edit: Oh, and further than that, I'm not "weeping for their poor judgement," but for your poor judgement in believing that the fallout from this will not affect you.

You have no idea what markets I play in and you've never even asked. Not that I can disclose those markets or the companies we do business with since they are all under confi. However, many of the areas I do business in are defensive in nature. I know that you'd probably like to see me get burned but my career moves are a bit better than that.

I wasn't referring to your own career but your belief (professed many times in the P&N thread by you and several others) that you're going to be able to easily walk right into a house at a cheaper price once all this shakes up as though nothing had happened.

I was just touring an area that I have been looking at and noticed that prices for houses in my range have already fallen by a fair amount. Considering my savings, amount of current debt (all student loans), income, and position, I won't have any problem at all. no 80/20 high DTI for me. Again, your assuptions about my situation are incorrect.

Of course, this only brings up whole new assumptions about your motives, ethics, etc.

Ah, I can see the conversation you'll have with lenders in the future.
You: "What do you mean the rate is 10%? I have perfect credit, large down, income, etc."
Bank: "Sorry, sir, that's my best rate, I don't care if you're Bill Gates."

See yet another of my posts in this thread that you conveniently ignored:
"Let's say for example you get a $300k mortgage at 5%, the monthly payment is $1610.46/mo. Lending guidelines tighten, large downs are required, rates go up, prices fall, and now the house is only $200k but rates are 9% -- your payment is now $1609/mo. and less homebuyers are like to qualify.

Exactly what have you "won"? "

Unless inflation ticks up significantly and the Fed starts raising rates, I don't think you're going to see a huge increase in interest rates for high quality obligors. Risk spreads will certainly widen.

If anything, the Fed will cut rates, risk spreads will widen, but for high quality obligors there won't be a huge effect.

Risk spreads right now are within historical norms for a prime obligor. I imagine they'll widen a bit but not a huge amount. During past times when the rates have widened significantly it's usually because the Fed was high or secondary markets weren't as developed.

Lets not forget that the tax writeoff, especially for me, would be larger under the 9%, I'd get essentially a 6% mortgage as opposed to a 3.33%. 3% drop as opposed to a 1.66% drop.

The situation will affect different people to different extents. Could we see a 10% super-prime obligor rate, sure, no question about it. I have never denied that. However, the likelihood, at least at this point whereby the credit exposure is on the subprime and beginning to move to alt-a, is that you won't see prime move tremendously.

 

[Demon-Xanth]

Vic:
In reference to a number of your replies to my statement:
I don't see the house as a long term asset as much as an alternative to rent. Eventually house payments (outside of taxes) will end if you're financially responsible. (key point) A paid off house makes retirement easier since you're not at the whim of a landlord. When I say "you can refinance and get a lower rate", I'm not talking about tomarrow, or a year from now. I'm talking a decade out. At this point, I'm looking to get my foot in the door in the way that allows me to be in the best position. In your example you're comparing "easy credit" vs. "hard credit" as saying why the higher price is easier. I'm not saying that it's going to be as easy for me to get my foot in the door as it used to be. Just that in the latter rate, there's room to IMPROVE your position while in the former you're stuck. In any case, the worst case (assuming you can get the loan) is the same monthly payment.

I understand your point of "if you can get the loan" and am not arguing that.

<-- saw the crash coming when housing was going up 30%/year and incomes were going up 1/10th that in a non-area limited market. I knew it couldn't keep up, and if it did, I still would be stuck holding something I can't afford.

If you want an example of how much the housing market's changed, look at the number of bank forclosure houses listed around Sacramento. It was in the top 10 most overvalued areas just a couple years ago. I just wasn't dumb enough to take a mortgage payment that was equal to my monthly take home pay. And the ARM loan that I was approved for jumped 10% (monthly payment wise) after 3 years. I didn't like that. But I can imagine how many people didn't notice that on thier charts.

 

[Vic]

Originally posted by: dullard

Originally posted by: Vic
See yet another of my posts in this thread that you conveniently ignored:
"Let's say for example you get a $300k mortgage at 5%, the monthly payment is $1610.46/mo. Lending guidelines tighten, large downs are required, rates go up, prices fall, and now the house is only $200k but rates are 9% -- your payment is now $1609/mo. and less homebuyers are like to qualify.

Exactly what have you "won"? "

It isn't ignored. It is perfectly correct. We all understand it, so I and others didn't think it needed to be commented on.

It isn't the APR that matters, it isn't the price that matters. It is the combo that matters to most buyers. What will the monthly payment be? That is what matters to them.

For most people, the monthly payment will be basically the same before or after the bubble pops/bursts/deflates/whatever. In your example, the buyer doesn't gain anything but his or her own satisfaction of getting a cheaper home (not a cheaper mortgage payment, but a cheaper home).

But therein lies the heart of the difference that I see between you and LK. Your example of a historic low interest rates to a historically common interest rate had the price plunge 50% (if easy credit money disappears). LK says prices will plunge 50%. He just assumes the underlined part will be true.

LK and I, in many ways, argue that the same things are likely to happen. Where we disagree is that I think that he selfishly and short-sightedly doesn't consider the full implications. Therefore, he acts like a bust is the best thing that could possibly happen for him personally, regardless of how it will effect others (i.e. no "weeping"), and imagines contradicting scenarios where he can profit from all this (for example, he said just a few days ago that the Fed wouldn't cut rates, yet now he argues that they will). In the meantime, I see the entire situation, boom to bust, as being a negative of irrational exhuberence and panic. To distract (in his usual asshattish fashion) from my argument in this regard, LK straw mans that I think home values are going to continue going up or that I want more borrowers who can't afford it to get financing blah blah blah.

 

[DougK62]

So basically, idiot consumers have ruined things for the smart ones. Lame.

 

[Demon-Xanth]

Originally posted by: DougK62
So basically, idiot consumers have ruined things for the smart ones. Lame.

You sound surprised, like it's never happened before.

 

[dullard]

Originally posted by: DougK62
So basically, idiot consumers have ruined things for the smart ones. Lame.

I think the term "ruined" is a bit extreme.

Smart consumers will still be able to get a house. Smart consumers can still profit on the housing market. Etc. For example, if your house falls in value 50% and you move, did you get harmed? Smart consumers will realize the answer is often "no". The house you sold fell in value 50%, but so did the house you bought when you moved. So, the two effects cancelled out.

Now if you move from an expensive home that fell in price to a cheap home that fell in price, you are harmed by a price drop. But that doesn't happen too often. And if you moved from a cheap home that fell in price to an expensive home that fell in price, you gained a bit from falling prices. Smart consumers will see that you can gain from this.

But what if you don't have a house yet. Sure, if getting mortgages is harder, they will be more costly. But as Vic said above, that is almost always met by falling prices on homes (due to fewer buyers). So, in the end, the smart consumer still has roughly the same monthly payment.

"Ruined" is a bit too harsh of a word. The sky is not falling on smart consumers. Yes, some things may be a bit worse, and some a bit better. But it wasn't "ruined".

 

[Vic]

Originally posted by: Demon-Xanth
Vic:
In reference to a number of your replies to my statement:
I don't see the house as a long term asset as much as an alternative to rent. Eventually house payments (outside of taxes) will end if you're financially responsible. (key point) A paid off house makes retirement easier since you're not at the whim of a landlord. When I say "you can refinance and get a lower rate", I'm not talking about tomarrow, or a year from now. I'm talking a decade out. At this point, I'm looking to get my foot in the door in the way that allows me to be in the best position. In your example you're comparing "easy credit" vs. "hard credit" as saying why the higher price is easier. I'm not saying that it's going to be as easy for me to get my foot in the door as it used to be. Just that in the latter rate, there's room to IMPROVE your position while in the former you're stuck. In any case, the worst case (assuming you can get the loan) is the same monthly payment.

I understand your point of "if you can get the loan" and am not arguing that.

<-- saw the crash coming when housing was going up 30%/year and incomes were going up 1/10th that in a non-area limited market. I knew it couldn't keep up, and if it did, I still would be stuck holding something I can't afford.

If you want an example of how much the housing market's changed, look at the number of bank forclosure houses listed around Sacramento. It was in the top 10 most overvalued areas just a couple years ago. I just wasn't dumb enough to take a mortgage payment that was equal to my monthly take home pay. And the ARM loan that I was approved for jumped 10% (monthly payment wise) after 3 years. I didn't like that. But I can imagine how many people didn't notice that on thier charts.

Sacramento is an example of a market that went to extremes, and neither it nor any major market in CA is one that I accept as an example for the rest of the country. Consider that I personally live and do business in a similarly-sized market, with a larger income average, and yet half the median value. Sac is a unique situation of a higher priced market (Bay Area) spreading its influence into a lower-priced one, to disastrous effect.
My mother-in-law owns a home there, I told her to sell in 04. She didn't, and now her 1600 sq ft ranch 25 miles from downtown isn't worth $600k anymore. Oh well, she only paid $120k for it 10 years ago.

So really, I see pointing at Sac as an indicator of the housing market as a whole as like pointing at Pets.com during the dot-com boom as an indicator of the stock market as a whole. It seems like every person arguing the housing market here is from Sac. And I keep saying the same thing: your market, while not necessarily different, is an extreme example, and not typical.

 

[Demon-Xanth]

Originally posted by: Vic
Sacramento is an example of a market that went to extremes, and neither it nor any major market in CA is one that I accept as an example for the rest of the country. Consider that I personally live and do business in a similarly-sized market, with a larger income average, and yet half the median value. Sac is a unique situation of a higher priced market (Bay Area) spreading its influence into a lower-priced one, to disastrous effect.
My mother-in-law owns a home there, I told her to sell in 04. She didn't, and now her 1600 sq ft ranch 25 miles from downtown isn't worth $600k anymore. Oh well, she only paid $120k for it 10 years ago.

So really, I see pointing at Sac as an indicator of the housing market as a whole as like pointing at Pets.com during the dot-com boom as an indicator of the stock market as a whole. It seems like every person arguing the housing market here is from Sac. And I keep saying the same thing: your market, while not necessarily different, is an extreme example, and not typical.

In my case, it's the market that I happen to be in. And as I said in an earlier post about it being overvalued, I understand that it's an extreme case. And I understand that my situation isn't everyone's. I knew something was out of kilter when my family looking to move up from LA wouldn't have fat stacks of cash leftover anymore. Sacramento is just an easy example for houses gone stupid. Just like Detroit is on the other end of extreme with houses going for less than my car would. (private party blue book of course)

The people I see getting really screwed by the whole deal are people in more stable markets who will only see interest rates as raising house prices.

 

[mugs]

Originally posted by: Demon-Xanth

Originally posted by: waggy
personally i think part of it is they do listen to "experts". well at least the experts on business news and shows like "flip this house" and seeing everyone buying McMnsions.

they think well if he can buy a house for $300k and sale it for $500K 3 months later then it should be worth tons in 3 years before the ARM matures!

then they find out it does not work that way.

i think its a case of "just enough knowledge to be dangerous"

You should watch "Flip this house" again. The last time I watched the show they had three people straight fail to be able to sell the houses they intended to flip. One started living in it, one started renting, and I forget what the third was doing. From what I saw, only 1/3rd of the people who were doing it had any buisness trying to do it at all. The theme of "can't build, can't keep track of finances, can't work with contractors, and doesn't see this as a buisness decision" kept coming up. Many of the people on the show thought it was an easy $200k and ended up stuck holding $3k/mo mortgages and maxed credit cards with a house that wouldn't sell.

When I was looking for a fixer upper, the market for them was overblown because of people like that who wanted to make a quick buck rather than save some cash for themselves.

I think you're talking about "Flip That House." "Flip This House" is the one that follows real developers who flip houses. The first season followed a company in South Carolina. The second season had a company in Texas, a company in Atlanta, and possibly more (the second season sucked, so I stopped watching). The guy who runs the company in South Carolina (Richard Davis) has a new show now called The Real Deal.

Flip THAT House, from what I've seen, has people who have no idea what they're doing, no business flipping houses, and are just trying to make a quick buck with no work. All of the flippers I saw were in California, but that was a couple of years ago.

Flip THIS House was a great show for the first season
Flip THAT House made me want to punch babies.

 

[Demon-Xanth]

Originally posted by: mugs
I think you're talking about "Flip That House." "Flip This House" is the one that follows real developers who flip houses. The first season followed a company in South Carolina. The second season had a company in Texas, a company in Atlanta, and possibly more (the second season sucked, so I stopped watching). The guy who runs the company in South Carolina (Richard Davis) has a new show now called The Real Deal.

Flip THAT House, from what I've seen, has people who have no idea what they're doing, no business flipping houses, and are just trying to make a quick buck with no work. All of the flippers I saw were in California, but that was a couple of years ago.

Flip THIS House was a great show for the first season
Flip THAT House made me want to punch babies.

I never realized that there was more than one show. That would explain why people either had everything down to a science while other people were trying to make gold from lead by experimenting with the four elements, earth, fire, wind, and water.

 

[waggy]

Originally posted by: Demon-Xanth

Originally posted by: mugs
I think you're talking about "Flip That House." "Flip This House" is the one that follows real developers who flip houses. The first season followed a company in South Carolina. The second season had a company in Texas, a company in Atlanta, and possibly more (the second season sucked, so I stopped watching). The guy who runs the company in South Carolina (Richard Davis) has a new show now called The Real Deal.

Flip THAT House, from what I've seen, has people who have no idea what they're doing, no business flipping houses, and are just trying to make a quick buck with no work. All of the flippers I saw were in California, but that was a couple of years ago.

Flip THIS House was a great show for the first season
Flip THAT House made me want to punch babies.

I never realized that there was more than one show. That would explain why people either had everything down to a science while other people were trying to make gold from lead by experimenting with the four elements, earth, fire, wind, and water.

hahah i didn't know that there was 2 shows. yeah that would explain things.

 

[ryan256]

Well crap This really puts a damper on my home shopping. Even with my saved $10k there is no way I will be able to avoid PMI.

 

[ponyo]

I've read jumbo loan rates have jumped to near 8% as banks are having to price the risk themselves. How bad is the pullout of the jumbo market? I see this hurting high priced homes severely if people can't get good rates on large loans.

I was looking to buy vacation beach condo near Pensacola, Florida in the next year or two but I don't know if I can get a loan then. I've heard some banks are not financing condos in Florida at all. Maybe I won't need a jumbo loan if this mortgage meltdown gets worse and condo prices collapse.

Will I be able to get a decent rate on vacation condo at around 70% LTV with stated income? Or is the market too uncertain right now and my time frame too far out to make any kind of prediction?

 

[slsmnaz]

Originally posted by: mugs

I think you're talking about "Flip That House." "Flip This House" is the one that follows real developers who flip houses. The first season followed a company in South Carolina. The second season had a company in Texas, a company in Atlanta, and possibly more (the second season sucked, so I stopped watching). The guy who runs the company in South Carolina (Richard Davis) has a new show now called The Real Deal.

Flip THAT House, from what I've seen, has people who have no idea what they're doing, no business flipping houses, and are just trying to make a quick buck with no work. All of the flippers I saw were in California, but that was a couple of years ago.

Flip THIS House was a great show for the first season
Flip THAT House made me want to punch babies.

Trademark Properties was his company. I watched the 1st season too and was disappointed they went to the people in TX. I think his show made people think it was very easy to do.

 

[alkemyst]

Originally posted by: dullard
Yes, but the disclosure is udder crap as it is. It may have worked well in 1968, but it doesn't work well with all of the more complex situations around now.

I've seen several ARM truth-in-lending statements. While you are correct that it does explicitly state how and when it will change, NONE of them have put what I listed above. NONE have said what the monthly payment will be in those situations. I had to take them home, look up a bunch of data, do some calculations (easy for me, but easy for everyone) and only then did I know what the monthly payments will be in various situations.

Yes, you and others are being honest and you are disclosing all that must be done. But far more could be done too. The disclosure forms seriously need to be updated and dumbed down. Don't do it in a way that the important info is missing. But put that info on page 2+. Page 1 should clearly state exactly what the payments could be under various scenerios and in simple English what situations will cause it to go up and down.

There are disclosures to an ARM loan that state no one has any way of knowing where the market is going to go.

That is why caps/margins are important to understand.

For all the bank knows, your property appraiser can reassess the whole area for 2x the tax.

It's people like you crying that are having requirements put in place that borderline borrowers must attend MANDATORY pre-loan education classes so they can learn that real estate doesn't always go up and rates/taxes/insurance don't always stay the same.

Another problem is when a bank lends against a house that was inflated say 2 years ago and now it's worth $100k-$200k less. Even if it wasn't interest-only the loan to value is really screwed up...it makes sense to many borrowers to just walk away from that property. This leaves the bank holding the bag.

I would say the majority of the people here have really no clue how the mortgage industry works yet think they are experts.

The mortgage market is cyclic. It's funny to hear noobs in the business (like all the brokers and real estate agents that signed on 3-5 years ago) talk about how never in the past 5 years have they ever seen this happen.

If one has been in the business for 10 years or more, you know this is nothing new. The latest was a big one though. Everything gets fed faster now and sensationalized more with the internet. The good news is the market 'peak' next time is always higher. Things are smoothing out....it's going to be bumpy through the rest of the year...

Also Dullard...a home can easily fall 50% in one market and the market you are moving into rises. Also most people move within 7 years, not enough time to make an impact in principal that dramatic. If you short sale a loan, you will need to cover that difference.

 

[Vic]

Originally posted by: alkemyst
The mortgage market is cyclic. It's funny to hear noobs in the business (like all the brokers and real estate agents that signed on 3-5 years ago) talk about how never in the past 5 years have they ever seen this happen.

If one has been in the business for 10 years or more, you know this is nothing new.

Heh, yep. My first boss in the industry way back when ('94) introduced it to me as the "Caviar and Cabbage soup" business. Such it is, such it is. He was saying that because, at the time, rates had just jumped 2% in as many months and whole pipelines had been lost.

 

[V00DOO]

Here is a breakdown of the amount of loans resetting through 2008 (source: JP Morgan). This is frightening. These numbers are approximate. It will be a hairy 2008! There is still an incredible amount of business out there even if only 25% of these can refinance.

March 07 = 6 billion $
April 07 = 7 billion $
May 07 = 9.8 billion $
June 07 = 10 billion $
July 07 = 12 billion $
Aug 07 = 17.5 billion $
Sept 07 = 18 billion $
Oct 07 = 20 billion $
Nov 07 = 23 billion $
Dec 07 = 22.5 billion $
Jan 08 = 25 billion $
Feb 08 = 25 billion $
March 08 = 23 billion $
April 08 = 22.5 billion $
May 08 = 24 billion $
June 08 = 18 billion $
July 08 = 20 billion $
Aug 08 = 25 billion $
Sept 08 = 23 billion $
Oct 08 = 23 billion $
Nov 08 = 23 billion $
Dec 08 = 20 billion $

Those are some crazy numbers. Link

 

[Delta6Echo]

Originally posted by: nakedfrog
I just refinanced my 80/20 into a 30 year fixed last month. Now, even with PMI, I'm paying less than I would have with the ARM (and a leg )

ARM or Option ARM? My Option ARM (HELOC) has a fixed interest rate.

I went from $3200/month to $1900/month....not bad.

 

[dullard]

Originally posted by: alkemyst
There are disclosures to an ARM loan that state no one has any way of knowing where the market is going to go.

That is why caps/margins are important to understand.

Yes, I agree completely. But the caps/margins are buried in long documents amongst hundreds of other numbers and confusing paragraphs. Interest rates are based on indicies that people signing the paper don't understand. Etc.

That is why I want a simple table on page 1. The table (and hopefully the broker) will say that they have no idea what will happen in the future. But the table lists the possibilites. What is so hard about that? If interest rates plunge, your mortgage payment will probably go down. Put what it is now and what will happen to your mortgage payment if it goes down. If interest rates soar, your interest will soar, put what will happen to your mortgage payment if it does soar.

At least then people will know the maximum and minimum they'll be paying for interest during the life of the loan, if the loan proceeds on schedule. I see story after story of people who DIDN'T understand that they might be paying hundreds of dollars more per month if interest rates go up. Yes, it was disclosed according to regulations. But no one highlighted that to the borrowers and certainly no one did the math to show what will happen to their mortgage payments.

If a borrower can afford $1500/month and sees that the mortgage payment will be $1400-$1850/month depending on how interest rates move, that should give them a signal that things may be quite bad. Instead, they see in the documents that they start out at $1500 and think everything will be ok. Sure, they'll be fine if rates go down, but not if rates go up. The POSSIBLE monthly payments just aren't currently shown to them right up on front in a big bold table.

For all the bank knows, your property appraiser can reassess the whole area for 2x the tax.

It is beyond the expectations for a bank to guess what will happen to politics. Hopefully, the buyers will be told that taxes can go up, but how much is anybody's guess. This can't be quantified. But the payments when the mortgage enters the adjustable period CAN be quantified very clearly. Lets say the current mortgage ARM rate is 6.5%, the margin is 2%, cap is +-2% per year, and the index is sitting at 8%, you can print what will happen if it went adjustable that day.

It's people like you crying that are having requirements put in place that borderline borrowers must attend MANDATORY pre-loan education classes so they can learn that real estate doesn't always go up and rates/taxes/insurance don't always stay the same.

I'm not going that far. All I want is that numbers are put right in front of them using data at the time of the document printing. I assume you have nice computer programs do the math for you, all you have to do is print that one page that specifies what CAN happen.

Another problem is when a bank lends against a house that was inflated say 2 years ago and now it's worth $100k-$200k less. Even if it wasn't interest-only the loan to value is really screwed up...it makes sense to many borrowers to just walk away from that property. This leaves the bank holding the bag.

Sadly, there is nothing that regulations can do about that. Hopefully it doesn't happen much, but it can and will happen.

I would say the majority of the people here have really no clue how the mortgage industry works yet think they are experts.

And yet the public is expected to know what will happen to their mortgage payments under various conditions without it printed for them. And half of them probably can't tell you what 5% of $1000 is.