Clock is Running Down on 'Cheap' Mortgages

Hearld Tribune.com ^ | 1/ | Michael Pollick

[upchuck]

"Besides the two ARMs, we also took out a home equity line on the Seventh Street house to put down a deposit on the Fifth Street house. There was no cash that we had in our pockets to put down on the Fifth Street house. All we had was our shining credit record. And the faith that the banks have in this real estate market that allows you to borrow 100 percent."

This guy needs to spend some time listening to Dave Ramsey on the radio. Dave made millions in real estate and then lost it all by doing the same dumb stuff this guy is promoting.

[Sally'sConcerns]

I don't listen to Coast to Coast. My only claim to fame is having been in mortgage banking starting back in the olden days when people were panic buying because rates were 15% and were rumored to be going up to 17% or more. There were the Step'ems, the Gip'ems, the EOM's, the ARM's with no caps and no limit on how often the loans could adjust.

I also saw the rush to refi at 13%, 12%, 11% and on down. Oh and not to mention seeing REO portfolio's increase because people got in over their heads.

Even after some rationality returned to the mortgage market I would have thought long and hard about financing with an ARM product with caps. One of the selling points for going with a 7/1/1 ARM was it being a great deal if one was only going to be in the property for a few years. Even then things change; property values go down, financial situations change, people stay in the house longer than a few years, etc.

Now there are interest only loans, 100% financing and other creative financing. No thanks!

Give me a fixed rate mortgage with enough house to live comfortably and be able to double up my payments if I choose to where I can get it paid off early.

I'm glad I retired early and haven't had to deal with the latest wave of creative financing because I don't think my conscience would have allowed me to close those loans.

[Cobra64]

We're on our 4th Re-Fi in 20 years.

Not us. We just built a new house on Lake James, NC two years ago. 4.375% fixed for 15 years. With semi-monthly automatic payments, that brings it down to 14 years.

We'll mortgage-free in 12 years.

[ex-Texan]

I hear you. Myself, I just waiting until the bubble bursts here in the Pacific Northwest. By the end of 2007 there will be thousands of foreclosures on the market. There is a feint whiff of panic in the air here in Oregon. There was a puff piece published in the Tribune where the writer quoted local experts who said "home prices are bargins . . . buy, buy, buy." What else are real estate and mortgage professional going to say? I know some people in the biz and they are all pushing exotic loans.

[JackDanielsOldNo7]

then we're moving in with my in-laws

Think of all the romantic evenings you will have.

[Polybius]

Rates have barely budged in 2 years. I paid 7.875% in May 2000, and re-fi'ed at 5.9% a year ago. It is now 6.15%. Big whoop.

You are not an example of the borrowers who will take it in the shorts.

The buyers that will get severely burned bought houses at overly-inflated prices because they could afford (just barely) the monthly payment with zero interest.

Now those people will have their interest go from zero to 6.15%.

[kx9088]

That all stopped after I said "I do".

[q_an_a]

the folks who write these articles must have stayed home during the various economic lessons in college. What builders will do to sell homes is make them smaller and use less land; this will make the costs affordable and home owners will be happy with 1800 sq ft instead of 2500 sq ft. The mortage will be a little higher, but still within the budget of most two income families.

[JackDanielsOldNo7]

You ain't telling me nothing new. It really stops after children. You know women get it in their head that sex is only for procreation and nothing else. Real marriage killer. Makes for real boring evenings.

[ex-Texan]

Leading Forecaster Warns About Treasury Yields

Fair use excerpt:

"When the curve inverts, run for the exits," said Smith, who served as an economist for the Fed from 1975 to 1977. "It will stay that way until the Fed realizes it caused a recession in 2007. Investors should start planning for a recession."

Smith expects the Fed to raise its target rate for overnight loans between banks three more times, to 5 percent from the current 4.25 percent. The U.S. central bank has raised rates by a quarter of a percentage point at every meeting since June 2004, when the target rate was at a 46-year low of 1 percent.

[kx9088]

So true, two kids later and now I'm finally finding more time for my hobbies like hunting, fishing, video games, etc.

I guess it's the old "the glass is half empty or half full" saying, I just like to hope that the second half tastes as good as the first half. :)

[SierraWasp]

"...but in the end, what else is new."

I know! One could die later today and then it's all somebody else's problem to be sure!!!

I mean heck... the danged Demonicrats go through their entire life without giving one tinker's damn about thier country, it's security or national pride!!!

[SierraWasp]

He/She just wants the government to swoop in and save all of us from ourselves so we can forget all about caveat emptor and live dangerously like Socialist Democrats!

He/She must be an Eliot Spitzer fan or something... Holy Toledo, just think of it!!! Eliot Spitzer, George Nori and Art Bell marchin together in the drenched with doom Rose Parade!!! Ha Ha Ha!!!

[GOPJ]

Lots of boomers are going to retire in two years - the start of a real flood.

And the first wave will be headed here - to Florida and the rest of the Suncoast. Sorry, I'll keep my bets on Florida. Run if you want to, but Florida's the future.

[aquila48]

"The best-case scenario for the future, the one from the real estate agents, is that prices will level out to single-digit appreciation rates.

Assuming that scenario, some would-be investors -- those who took out highly leveraged loans with extremely low payment options -- could soon find themselves owing more on a house than it is worth."

This nonsequitor is where I stopped reading - whatever else this guy is going to say ain't going to be worth the paper it isn't written on.

[GOPJ]

Not us. We just built a new house on Lake James, NC two years ago. 4.375% fixed for 15 years. With semi-monthly automatic payments, that brings it down to 14 years. We'll mortgage-free in 12 years.

I'm "fixed" at 5% and will be mortgage-free before you! Great feeling of freedom, isn't it?

[em2vn]

So you are using your in laws as a cash cushion so that you can have what you want in the future.
Be an adult and stay the hell out of your in laws home and make do on your own.

[kx9088]

Before you start making assumptions, I let you know that they came to us with this idea. After we expressed the notion of leaving the area in a few years they came to us with the suggestion of moving in with them, paying off debt and saving money so that we can move to where we want to.

A few years ago they started bringing up the idea of adding on an in-laws suite to our house when we finally move.

So just so you know, it was their idea.