Life after foreclosure

[StageLeft]

Link

Synopsis:

Family 1 had a medical event that caused a reduction in income. However, they also had an ARM, which apparently was the straw on the camel's back.

With my husband unable to work, we could have paid the mortgage without the ARM reset but nothing more

Family 2 No mention of an ARM. Their income dropped while taking care of a child and also with a medical event causing reduction in income. However, having bought the house in 1994, it would have had a great deal of equity, except that

We took great vacations, if we saw something we wanted we bought it,

Family 3 some mention of reduction in income, but also

took out an adjustable rate mortgage to keep the initial monthly payments affordable...found himself severely underwater thanks to falling home prices and several cash-out refinances

Family 4 Again, ARM reset costs them tons.

---

In three of these cases ARM resets jacked up costs substantially (in the non-ARM costs went up by using the house as an ATM). In two there were possibly unpredicable reductions in income which, when combined with the reset, caused problems.

These are only four families, but all families should expect to see bumps in income over time. It seems that if in each of these cases you replace the ARM with a fixed from the get go with a payment equal to their initial ARM(and no HELOCs after to buy luxuries), they would have been able to stay in their houses.

 

[RyanPaulShaffer]

Originally posted by: Skoorb
Link

Synopsis:

Family 1 had a medical event that caused a reduction in income. However, they also had an ARM, which apparently was the straw on the camel's back.

With my husband unable to work, we could have paid the mortgage without the ARM reset but nothing more

Family 2 No mention of an ARM. Their income dropped while taking care of a child and also with a medical event causing reduction in income. However, having bought the house in 1994, it would have had a great deal of equity, except that

We took great vacations, if we saw something we wanted we bought it,

Family 3 some mention of reduction in income, but also

took out an adjustable rate mortgage to keep the initial monthly payments affordable...found himself severely underwater thanks to falling home prices and several cash-out refinances

Family 4 Again, ARM reset costs them tons.

---

In three of these cases ARM resets jacked up costs substantially (in the non-ARM costs went up by using the house as an ATM). In two there were possibly unpredicable reductions in income which, when combined with the reset, caused problems.

These are only four families, but all families should expect to see bumps in income over time. It seems that if in each of these cases you replace the ARM with a fixed from the get go with a payment equal to their initial ARM(and no HELOCs after to buy luxuries), they would have been able to stay in their houses.

Yes, ARMs are bad and a fixed rate mortgage is the best...anybody with a basic understanding of credit, interest, etc. should understand this.

People who got ARMs just wanted to get into more house than they could afford, abuse the ARM as much as possible, then when the ARM reset, "WAAH! I can't afford this! I was screwed despite the millions of forms and explicit explanations that I had to sign and date describing to me what I was getting into."

 

[StageLeft]

I think fixed are best for private residences, at least if you have any reasonable concern about hitting roadblocks in the future with income. I know a guy who owns about 20 properties and he does adjustable rate on all of them. Says that overtime you pay less and he is right, but I think he has an enviable position of being able to rent these out and adjust his income accordingly, so even if rates hit, say 10%, he'd be charging his tenants a great deal more to cover the loss. A homeowner would presumably receive a higher income over time if inflation kicked in, but it's not guarantee, plus so many home owners see their mortgage as a pretty substantial portion of net that it doesn't make sense to play with too much fire. If you have a great deal of non-house equity though and a comfortable cushion, probably over time adjustable rates could be more reasonable.

 

[Ozoned]

Originally posted by: RyanPaulShaffer

Originally posted by: Skoorb
Link

Synopsis:

Family 1 had a medical event that caused a reduction in income. However, they also had an ARM, which apparently was the straw on the camel's back.

With my husband unable to work, we could have paid the mortgage without the ARM reset but nothing more

Family 2 No mention of an ARM. Their income dropped while taking care of a child and also with a medical event causing reduction in income. However, having bought the house in 1994, it would have had a great deal of equity, except that

We took great vacations, if we saw something we wanted we bought it,

Family 3 some mention of reduction in income, but also

took out an adjustable rate mortgage to keep the initial monthly payments affordable...found himself severely underwater thanks to falling home prices and several cash-out refinances

Family 4 Again, ARM reset costs them tons.

---

In three of these cases ARM resets jacked up costs substantially (in the non-ARM costs went up by using the house as an ATM). In two there were possibly unpredicable reductions in income which, when combined with the reset, caused problems.

These are only four families, but all families should expect to see bumps in income over time. It seems that if in each of these cases you replace the ARM with a fixed from the get go with a payment equal to their initial ARM(and no HELOCs after to buy luxuries), they would have been able to stay in their houses.

Yes, ARMs are bad and a fixed rate mortgage is the best...anybody with a basic understanding of credit, interest, etc. should understand this.

People who got ARMs just wanted to get into more house than they could afford, abuse the ARM as much as possible, then when the ARM reset, "WAAH! I can't afford this! I was screwed despite the millions of forms and explicit explanations that I had to sign and date describing to me what I was getting into."

Play the system, live life larger than you can without the system.

Thanks to government regulations.

 

[CPA]

In my personal situation, i have an ARM which when it will reset will be 1% above the 10 year LIBOR rate. The 10 year LIBOR is currently 3.76% meaning my new rate would be 4.76 or almost 2% lower than my current rate. Unfortunately, I can't get the mortgage company to swap me out now.

 

[DAPUNISHER]

All I read was, people buying more house and/or living a lifestyle they really could not afford to begin with. Couple 2 was the closest to responsible, but had no "bad case scenario" contingency. I just find myself unsympathetic.

 

[TheSlamma]

Originally posted by: DAPUNISHER
All I read was, people buying more house and/or living a lifestyle they really could not afford to begin with. Couple 2 was the closest to responsible, but had no "bad case scenario" contingency. I just find myself unsympathetic.

Have to agree with this.

CNN's stories always seem to do this too. Like the the poor bus driver in New England with an $800,000 house. Fvck her and all these greedy bastards.

 

[rudder]

When rates are still hovering at the lowest the have been in decades... the average homeowner would be a fool to get into an ARM. The only place the rates will go are up.

 

[Druidx]

When I went in to get pre-approved on my last house, the loan officer acted like a used car salesman. He pushed the idea of ARM's and repeatedly let me know I could qualify for a much larger loan than I was interested in.

 

[ahurtt]

Originally posted by: RyanPaulShaffer

Originally posted by: Skoorb
Link

Synopsis:

Family 1 had a medical event that caused a reduction in income. However, they also had an ARM, which apparently was the straw on the camel's back.

With my husband unable to work, we could have paid the mortgage without the ARM reset but nothing more

Family 2 No mention of an ARM. Their income dropped while taking care of a child and also with a medical event causing reduction in income. However, having bought the house in 1994, it would have had a great deal of equity, except that

We took great vacations, if we saw something we wanted we bought it,

Family 3 some mention of reduction in income, but also

took out an adjustable rate mortgage to keep the initial monthly payments affordable...found himself severely underwater thanks to falling home prices and several cash-out refinances

Family 4 Again, ARM reset costs them tons.

---

In three of these cases ARM resets jacked up costs substantially (in the non-ARM costs went up by using the house as an ATM). In two there were possibly unpredicable reductions in income which, when combined with the reset, caused problems.

These are only four families, but all families should expect to see bumps in income over time. It seems that if in each of these cases you replace the ARM with a fixed from the get go with a payment equal to their initial ARM(and no HELOCs after to buy luxuries), they would have been able to stay in their houses.

Yes, ARMs are bad and a fixed rate mortgage is the best...anybody with a basic understanding of credit, interest, etc. should understand this.

People who got ARMs just wanted to get into more house than they could afford, abuse the ARM as much as possible, then when the ARM reset, "WAAH! I can't afford this! I was screwed despite the millions of forms and explicit explanations that I had to sign and date describing to me what I was getting into."

Wrong, I have an arm and the reasons I got it were 2. First, the lower interest rate. Second, I did not overpay for my house and didn't buy more house than I can afford and fully intend to sell it after the amount of time the ARM resets (which will be after 7 years in mid-2011) and move into something nicer. Additionally I had protections built into the contract which prevent it from resetting to any kind of crazy amount in the event I don't sell it in 2011, but I'm not likely to need that provision as we are well on track for achieving our goal and have plenty of savings in reserve. (We are very frugal and by most people's measures we live below our means.) This is to show that everything has it's purpose. ARMs are not inherently EVIL or BAD, but too many people are inherently myopic.

 

[ElFenix]

Originally posted by: RyanPaulShaffer

Yes, ARMs are bad and a fixed rate mortgage is the best...anybody with a basic understanding of credit, interest, etc. should understand this.

People who got ARMs just wanted to get into more house than they could afford, abuse the ARM as much as possible, then when the ARM reset, "WAAH! I can't afford this! I was screwed despite the millions of forms and explicit explanations that I had to sign and date describing to me what I was getting into."

ARMs have their place, but that place was not financing half the mortgages in the country like people seemed to be doing.

 

[RyanPaulShaffer]

Originally posted by: ElFenix

Originally posted by: RyanPaulShaffer

Yes, ARMs are bad and a fixed rate mortgage is the best...anybody with a basic understanding of credit, interest, etc. should understand this.

People who got ARMs just wanted to get into more house than they could afford, abuse the ARM as much as possible, then when the ARM reset, "WAAH! I can't afford this! I was screwed despite the millions of forms and explicit explanations that I had to sign and date describing to me what I was getting into."

ARMs have their place, but that place was not financing half the mortgages in the country like people seemed to be doing.

I was thinking before that I should have edited my post to be more clear about that. ARMs have their place, but people/banks/etc. abused the heck out of them, hence our current mess.

 

[NaughtyGeek]

My father in law tried to convince me over and over again that an ARM was the way to go when I was buying my house. Basic thinking was there was no doubt I'd be selling my house in 5 years to upgrade. Glad I ignored him and went fixed. Too bad I didn't ignore everybody and wait for the ridiculous market to crash on itself, probably could have prevented this upside down mortgage I'm in now. Oh well, can't argue with decades of steadily increasing home values I suppose regardless of your "gut feeling" that it was gonna crash.

 

[ahurtt]

Originally posted by: NaughtyGeek
My father in law tried to convince me over and over again that an ARM was the way to go when I was buying my house. Basic thinking was there was no doubt I'd be selling my house in 5 years to upgrade. Glad I ignored him and went fixed. Too bad I didn't ignore everybody and wait for the ridiculous market to crash on itself, probably could have prevented this upside down mortgage I'm in now. Oh well, can't argue with decades of steadily increasing home values I suppose regardless of your "gut feeling" that it was gonna crash.

They were trying to sell me a 5 year ARM too but I insisted on a 7 year because it was evident that the rate of home value increase was unsustainable. We bought our house in 2004. If I had let them sell me on a 5 year ARM I'd be in the same boat. Decades of "steadily increasing" home values is one thing, but what we saw up until 2007 when it all started to come tumbling down was anything but "steady." Home values were doubling in just a couple short years and that just never happens. When something seems too good to be true, IT IS. What we saw in the run up to the peak of the bubble was not "steady increase." Now if you were just unfortunate enough to have bought at the peak of the bubble, well I'm truly sorry for you, friend. Doesn't matter if you had an ARM or Fixed, you're taking some kind of a bath.

 

[Drako]

Originally posted by: ahurtt

Originally posted by: RyanPaulShaffer

Originally posted by: Skoorb
Link

Synopsis:

Family 1 had a medical event that caused a reduction in income. However, they also had an ARM, which apparently was the straw on the camel's back.

With my husband unable to work, we could have paid the mortgage without the ARM reset but nothing more

Family 2 No mention of an ARM. Their income dropped while taking care of a child and also with a medical event causing reduction in income. However, having bought the house in 1994, it would have had a great deal of equity, except that

We took great vacations, if we saw something we wanted we bought it,

Family 3 some mention of reduction in income, but also

took out an adjustable rate mortgage to keep the initial monthly payments affordable...found himself severely underwater thanks to falling home prices and several cash-out refinances

Family 4 Again, ARM reset costs them tons.

---

In three of these cases ARM resets jacked up costs substantially (in the non-ARM costs went up by using the house as an ATM). In two there were possibly unpredicable reductions in income which, when combined with the reset, caused problems.

These are only four families, but all families should expect to see bumps in income over time. It seems that if in each of these cases you replace the ARM with a fixed from the get go with a payment equal to their initial ARM(and no HELOCs after to buy luxuries), they would have been able to stay in their houses.

Yes, ARMs are bad and a fixed rate mortgage is the best...anybody with a basic understanding of credit, interest, etc. should understand this.

People who got ARMs just wanted to get into more house than they could afford, abuse the ARM as much as possible, then when the ARM reset, "WAAH! I can't afford this! I was screwed despite the millions of forms and explicit explanations that I had to sign and date describing to me what I was getting into."

Wrong, I have an arm and the reasons I got it were 2. First, the lower interest rate. Second, I did not overpay for my house and didn't buy more house than I can afford and fully intend to sell it after the amount of time the ARM resets (which will be after 7 years in mid-2011) and move into something nicer. Additionally I had protections built into the contract which prevent it from resetting to any kind of crazy amount in the event I don't sell it in 2011, but I'm not likely to need that provision as we are well on track for achieving our goal and have plenty of savings in reserve. (We are very frugal and by most people's measures we live below our means.) This is to show that everything has it's purpose. ARMs are not inherently EVIL or BAD, but too many people are inherently myopic.

Well stated.

I've got an ARM, and I'm paying significantly lower interest than anyone I know with a fixed rate mortgage. ARMs are great if you know what you are doing, and you plan for the worst case scenario - rate reaches its cap.

 

[ZeGermans]

Originally posted by: Ozoned
Play the system, live life larger than you can without the system.

Thanks to government regulations.

Just going to point out here that republicans actually blame the collapse of a multi-trillion dollar industry not on incompetence and greed, but on poor people.

 

[IndyColtsFan]

Originally posted by: TheSlamma

Originally posted by: DAPUNISHER
All I read was, people buying more house and/or living a lifestyle they really could not afford to begin with. Couple 2 was the closest to responsible, but had no "bad case scenario" contingency. I just find myself unsympathetic.

Have to agree with this.

CNN's stories always seem to do this too. Like the the poor bus driver in New England with an $800,000 house. Fvck her and all these greedy bastards.

You're correct -- CNN's stories always do this, and I am not sure if the reporters are just too dumb to omit these incriminating details or if they just think people reading their articles are too dumb to be able to pick them out. If you read their sob stories, just about every one of them has some illustration of incredibly bad judgment by the "victim."

 

[IndyColtsFan]

Originally posted by: ZeGermans

Originally posted by: Ozoned
Play the system, live life larger than you can without the system.

Thanks to government regulations.

Just going to point out here that republicans actually blame the collapse of a multi-trillion dollar industry not on incompetence and greed, but on poor people.

And I'd like to point out that certain members here (I suspect you are one of them) are too quick to pin the blame on "incompetent and greedy" banks instead of where it belongs -- on BOTH the banks AND the people not understanding what they were getting into when they signed up for these mortgages.

 

[ZeGermans]

Yes its the poor uneducated getting conned that are to blame. Just like women deserve to be raped if they dress to sexy, you see.

 

[IndyColtsFan]

Originally posted by: ZeGermans
Yes its the poor uneducated getting conned that are to blame. Just like women deserve to be raped if they dress to sexy, you see.

Yes, because people shouldn't have ANY responsiblity for understanding what they are getting into when signing these documents or buying a house. It is all the fault of the incompetent, greedy banks. :roll:

Maybe if these people are "uneducated," they should take the time to educate themselves on the process of buying a home and the details of the loans. When I bought my first house, I sure didn't just run out and sign the first mortgage I could get my hands on. I read a lot about how the process worked and asked a lot of questions to friends, family, and banks before I finally went through with a purchase. Heaven forbid if people take personal responsibility! Furthermore, if they are "poor" as you claim, WHY on earth are they buying houses?

Last time I checked, foreclosures were hitting the middle class very hard, not just "poor" people. Do you want Obama to buy everyone houses, sign their mortgage papers, and if they default, blame the "evil" banks too?

 

[ZeGermans]

"middle class" is a construct made to make people who were slightly better off than dirt poor have a sense of superiority that the upper class could use to exploit against them. "well that poor fuck makes 30 grand a year and I make 60 grand a year, why I have much more in common with this dude that makes 2 million from his trust fund than that poor rabble"

 

[JSt0rm]

so 2 out of 4 of them had a medical event? holy shit

 

[IndyColtsFan]

Originally posted by: ZeGermans
"middle class" is a construct made to make people who were slightly better off than dirt poor have a sense of superiority that the upper class could use to exploit against them. "well that poor fuck makes 30 grand a year and I make 60 grand a year, why I have much more in common with this dude that makes 2 million from his trust fund than that poor rabble"

What does that have to do with this discussion? There is a middle class whether you like it or not. The middle class can be further subdivided into lower, middle, and upper. Furthermore, income alone isn't the sole determinant -- it also depends on your expenses, dependents, etc. A family making over $100K a year might be considered "upper middle class" if you just look at their income, but if you find out they live in NYC, LA, or SF and have 10 kids, you might think otherwise.

How about stop spouting off what your liberal professors are telling you and actually think before you type?

 

[IndyColtsFan]

Originally posted by: JSt0rm01
so 2 out of 4 of them had a medical event? holy shit

And when I bring things like this up, I am told "oh, every state has catastrophic insurance for stuff like that." Obviously that person is wrong.

 

[Patranus]

Originally posted by: JSt0rm01
so 2 out of 4 of them had a medical event? holy shit

The problem with the story then is that it is not a accurate representation of the US population.

Only 0.4% of the total US population declared bankruptcy in 2008 up 40% for 2007. That is TOTAL bankruptcies not just medical related.

It misleads the public to believe that people are going bankrupt left and right due to medical costs when in fact it is less than 0.4% of the total US population.

Obama makes similar claims with his "36 million uninsured" statement. When you remove the illegals and the people who can afford insurance but CHOOSE to not buy any, you are left with 10 to 15 million or 3% to 4% of the total US population.

These people made a CHOICE to live outside of their means, and get an ARM load to buy a home. I have no sympathy for them what so ever.