The tsunami is in the spring.
Posted on 08/30/2007 7:12:52 AM PDT by vietvet67
New York - Millions of homeowners around the nation are now getting the news in the mail: The interest rate on their home loans is going up, possibly to double-digit levels.
The hardest hit are expected to be people who have less-than-stellar credit and cannot afford to make the new payments. An increase of several hundred dollars a month will force them either to get relief or to default. The prospect of significant and growing losses has already rocked Wall Street and shaken up the broader mortgage markets. And, concerned about the human suffering, policymakers are already searching for ways to help people out.
"The meltdown in the subprime market is the biggest threat to the housing market and the broader economy," says Mark Zandi, chief economist at Moody's Economy. com. "It is at the vortex of the problem."
Over the next several months, banks will be changing the "teaser rates" that homeowners received two years ago.
The peak for resetting loans will be in October, when the rates on some $50 billion worth of mortgages are likely to rise by 2 percentage points or more. This could mean a rise of several hundred dollars a month for many borrowers.
For example, on a $210,000 loan balance (the average subprime amount in 2006), the additional 2.5 percentage point increase on the interest rate adds about $4,560 a year, or about $380 a month, estimates James Kragenbring, senior investment officer at Advantus Capital Management in St. Paul, Minn.
(Excerpt) Read more at csmonitor.com ...
The solution would be for the govt to require the banks that hold these mortgages to convert these rates to a 10yr Interest Only ARM. The banks would get their money and the homeowner can wait until the house starts appreciating in value again so that it can be sold without a loss.
When I see situations like here in Utah where some twenty somethings have a $600,000 home, two cars, jet skis, etc..., and the wife stays home while the husband earns around 40G a year and then they can't make the payments, why should my tax dollars bail them out? This is a massive problem in our state, so I imagine it's probably happening all over the country.
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And if the values don't increase? What of the banks that sold the paper? Who would be forced (by Washington!) to re-write the loan? What about those loans that are already interest only?
Left unsaid, for obvious reasons is the fact that according to Countrywide Mortgage, the largest of the lenders involved in sub prime, almost 65% of those teaser rate ARM’s have been refi’d to fix rate conventional mtgs already. People are not quite as s stupid as the media would have us think. The hand writing was on the wall a long time ago and many people were able to adjust.
so. people who, through the consequences of their own life choices, cannot afford a home, yet buy one anyway, making yet another bad decision, expect those of us who live according to our means, and try to make the right decisions to sacrifice further to bail them out.
do I get this right?
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
IIRC this situation goes back to WJC misAdministration when he bullied the industry into creative financing for the “poor”. His promise to make it possible for everyone to be able to participate in the “American Dream of Home Ownership”.
Always wondered about that...If the Bank, or lending institute holds the title to the property, then why aren’t they called the “Homeowners”? Curious as to how many people actually do OWN their homes.
The reason this is a point with me at all is because the inference to “Home Ownership” causes some to really believe as a “homeowner” they’ve made it to the Condo Uptown...”You Rich”. It’s BS. We don’t OWN our home, we’re paying monthly payments on a mortgage to the “Homeowners”, a lending institution. Who knows, maybe we’ll have the title, and actually be “Homeowners” before we’re dead.
The real benefit towards a mortgage is that one is paying off the loan towards the goal of “Home Ownership”, rather than shooting ones bucks off into outer space for someone else’s gains. Why rent when often the mortgage payments are cheaper than rent.
An ARM is like any other form of credit or tool. If it is used improperly, it can do serious damage.
The mortgage meltdown is due mainly to people not being good at math and nothing more.
I doubt that any remedy put forth by our government will be designed to aid strapped homeowners but rather the big money interests.
whatever remedy the feds suggest is sure to do one thing - soak the taxpayers.
I have done several refinances where we have taken people from subprime into FHA or conventional.
That’s the way the system is supposed to work.
Not all subprime borrowers were poor credit risks.
You big on Communist solutions to economic problems?
If 2% difference means you lose your house without any other factors involved then they are an idiot who is too stupid with their money to do anything other than rent.
Unless you did it in the early years of the Reagan administration :) then your rate decreased every year for quite a while.
The CORRECT solution is for the Government to keep its incompetent hands off this mess that they helped create with their prior meddling and let the markets work it out.
Whatever happened to the "get a second job" concept ? Oh right, these people think they're ENTITLED to have that big house without any more effort.
Anybody remember when Greenspan was singing the praises of ARMs?
We're trying to reduce the influence of Gov't, not have it step in deeper and deeper everyday.
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