Just when I thought I'd heard everything.
There are some really flakey mortgages out there and many are hiding within AAA rated CMOs courtesy of "generous" securities rating agencies! Is it any wonder that hedge funds (and other entities), when forced to account for what the value of their "TRUE ASSETS" is, no buyers can be found (thus giving their assets a immediate ZERO value?
It will be many months (hopefully not years) before an accurate picture of the extent of this problem will be revealed!
Just wait until all these "genious" portfolio managers are exposed as either careless idiots or outright crooks! All this after they collected exhorbitant fees for placing their clients' assets in "Gilded Junk"!
Just when I thought I'd heard everything.
I believe that there are 2 types of ARM loans. One has a cap on interest increases. These say that the increase in interest can't exceed some fixed percentage each year. Another, nastier sort of ARM caps the increase in your payment per year. For instance, it may limit the increase in your (minimum) payments to a fixed percentage. However, it makes NO MENTION of any interest rate increases. So, if the interest rate increases at a greater rate than your payments, you go into negative amortization, meaning that every month you go further into debt.
Unfortunately, many people don't understand the difference between the 2 types of ARMs.
Mark