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pg 5
http://www.occ.treas.gov/ftp/deriv/dq406.pdf
Deflation cometh...even if there is quite a bit of near term inflation to ride out first. Globalization and the redistribution of wealth from the US's middle class to the rest of the world has started and will not stop. At this time the best kind of mortgage is the one you don't take on. Rent, rent your a$$es off!
Navigating? That was a random walk through miscellaneous housing quotes and issues. About what you would expect from someone clearing a cache and submitting the resulting olio to an absentminded editor.
Tanta,
I have had good success on my blog with naming the reporters of the article in question and calling their article dumb a couple times - politely and firmly. The reporters all Google their own names, and I've engaged in some reality-based and information-driven conversations with the ink-stained wretches as a result. You really can lead them to wisdom.
Is there anyone out there that thinks that even if Fed rate drops to 1% that the mortgage rates will decrease significantly, especially given the (still) high price of housing and flat incomes?
Giving Fed money away doesn't make it more likely that loans will be given to people who have no reasonable chance of paying them off. The risk of non-payment is not yet fully incorporated into the present rates, and it unlikely that time will be in favor of lower risks and lower rates.
So with no payment reduction at this time, why are ARMs still being offered? Who would actually take "advantage" of them? Is it to the brokers "advantage" whereby they use the ARM to sell to unqualified borrowers who cannot meet 30 year fixed terms?
[If that was supposed to be funny, it didn't work. There are other places on the web in which you can engage in racist trolling or flame-baiting. This is not one of them. --Tanta]
Edited By Siteowner
PHH Sale to GE, Blackstone May Collapse as Banks Balk (Update5) - Bloomberg.com
LBO's are over baby.
LBO of a mortgage lender? They have to sell the debt to Martians, because nobody in this planet will be that stupid.
Even in an environment of expected declines in interest trates and home price appreciation I would say it's still a bad idea to take an ARM. You can never trust interest rate expectations and you can always refinance a fixed 30 year into a lower fixed 30 year. So either way you are refinancing.
If you want to reduce your risk, don't buy more house than you can afford on a future lower salary.
Parida.com - Political news Resources and Information.This website is for sale!
ARTHUR BURNS recommended Alan Greenspan to Richard Nixon and in justification of that recommendation told me one day that he thought it was appropriate that the position be held by someone of Jewish faith!
I first met Alan Greenspan in 1948 when I attended the New York University School of Commerce, Accounts and Finance. At that time I was a junior in my studies and Alan was a sophomore. I was the Senior Fellow in the Economics department and he wanted to get a fellowship in the Department.
H was a graduate from the Bronx (NY) High School of Science which was a most prestigious public school. I was told later that one of the fellow students of Greenspan in the same class was Henry Kissinger and other well known members of the Nixon cabinet. I have never verified that.
Greenspan graduated from NYU Commerce in 1949/1950 and went on to study economics at the NYU Graduate School of Business. He got a Master of Business Administration from that school and never went on for his doctorate.
He joined an economic forecasting firm named Townsend & Co. They specialized in what is known as an econometric model system of forecasting which is forecasting by mathematical equations (modeling). Greenspan bought out Townsend (I believe in the late 1950's or early 1960's) and renamed the firm "Townsend, Greenspan & Co.".
I have a mental picture of Alan at forums poring over his computer runs to evaluate whatever some one said and flipping the pages looking up numbers. I also remember him droning on reading the numbers off the spread sheets. Many years later he told me that he used the mathematical models a as a bench mark but changed anything if he intellectualized to the contrary. He forecast one of the recessions on the button (the only one) and when I asked him how he did it he replied that he had used his eraser!
His primary clients were Wall Street Brokerage firms. They would give his research away to their clients in return for the clients giving them brokerage business. Greenspan would give speeches quite frequently for the Wall Street houses whenever they held financial forums. He was also a frequent speaker for the "National Industrial Conference Board" (now known as "The Conference Board") as well as the financial magazine " The Institutional Investor".
From about 1962 until he joined the Council of Economic Advisors I debated him frequently and played golf with him on more than one occasion.
He was a charter member of the Nixon Economic Advisory group in 1968 along with Arthur Burns, Peter Flanigan, Milton Friedman and myself. At that time he was an ardent disciple of Ayn Rand and I heard him expound her views on many an occasion although he has since denied being a proponent of her thinking.
Arthur Burns took Greenspan under his wing sometime in the late 1960's and following the advice of Dr. Burns Alan Greenspan returned to the NY
An additional strike against ARMs right now is that, given declining prices, people may be forced to hold on to their houses longer then they expect...
"Quote-bots" - Nice.
Didn't we just cover ARM caps the other day? I know Bankrate folks read this blog.
You'd think Greg McBride - make that senior analyst Greg McBride - would know about caps when it comes to quoting potential adjustments on 3/1's. Somebody who got in at 4.5 percent in 2004 could now be looking at 7.25 or 7.5 percent, Mr. McBride said.
Arthur Burns took Greenspan under his wing sometime in the late 1960's and following the advice of Dr. Burns Alan Greenspan returned to the NYU Graduate School of Business Administration to get his Doctorate in economics. At that time Greenspan had to be in his late 40's.
Arthur Burns was the best business cycle analyst in the world at that time. He was Chairman of the Council of Economic Advisors under Nixon and later Chairman of the Federal Reserve. His last appointment was as Ambassador to Germany where he did a creditable job. He is deceased.
One of the last official acts of Richard Nixon was the appointment of Alan Greenspan as Chairman of the Council of Economic Advisors in early 1974. Richard Nixon appointed Greenspan to the Chair of the Council as a result of the advice of Arthur Burns. Nixon adored Arthur Burns since Burns warned him in 1960 that a recession would start before the elections! Eisenhower ignored Burns warning, Burns was right on and Nixon was defeated by Kennedy under the slogan "We have to get the country moving".
The forecasting business of Greenspan had been deteriorating rapidly for a combination of reasons. He only forecast one recession in advance of the event, he was a most boring speaker, Wall Street commissions for his services had dried up (the SEC frowned on the practice) and finally he was spending an inordinate amount of time on politics. He had lost all of his clients 6 months before he was appointed Chairman of the Council and was living off of his speaking fees which were not great. At that time he had no clients and no clients paying him retainers. His appointment as Chairman of the Council of Economic Advisors bailed him out.
His entire life was now of public service. To the best of my knowledge, which may be incomplete and erroneous, is that he never served on the Board of Directors of American corporations and had no such experience.
When he entered public service in 1974 he had very few monetary assets and what he did have was in conservative vehicles, little income and no pension that was publicly known. In other words he went into government service relatively poor and with little in the way of future income for retirement.
Troll Brother - let it go, man.
You'd think Greg McBride - make that senior analyst Greg McBride - would know about caps when it comes to quoting potential adjustments on 3/1's.
Well, he's probably talking about those 5/1s with the 5% first cap that were originated in 2004 and set to adjust this year because of a fold in the space-time continuum. That happens.
Troll Brothers, what are you up to? You do not need to copy the text of some website into this comment thread. If you have some reason to direct our attention to that, a link and an explanation of why it's important (in a thread that doesn't happen to be All Greenspan All the Time) would suffice.
Maybe US banks won't go the way of NorthernRock because of so few savers here with over $100k in moolah. But since all US banks have been acting like non-depositories-in-drag with this off-balance-sheet foolishness, maybe the little guys will give the bankers yet another lesson in rational behavior.
What happens if central bankers decides a bank is too big to fail but the banks customers and investors dont agree?
Dealbreaker - A Wall Street Tabloid - Business News Headlines and Financial Gossip
Troll Brothers - Stay away from the consipracy theories. They only serve to divert your attention to the real facts behind world events. They play to hatred and they give cover to incompetent National governments and institutions.
If you take a quick look at Nazi Germany's performance in the WWII you can make a strong case that Hitler lost the war only because of his racism, thank God. Quickly - Hitler never finished off Britain in 1940 because he thought them natural allies who would come round because they were "white" like him. He foolishly attacked the Russians because he thought them "subhuman" and grossly underestimated them. His policies forced many scientists to leave the country who could have built him an Atom bomb and led to the production of the US bomb.
It's just craziness, there are tons of middle east governments today that whip up hatred for the Jews to divert their people's attention from the failings of their incompetent and corrupt governments. There is a consipracy theori for every bent: Big oil, Federal reserve, Skull & bones... you name it, they are all BS.
I think you need to weigh ARM loan benefits in a comprehensive manner, over time. ARM indices have generally outperformed fixed rates rather significantly over the last 10 years. The key to ARMs is the margin.
If you factor in the savings gained by lowering payments without the cost of refinancing plus the impact of intial low rate amortization velocity vs a fixed rate loan, ARMs do tend to shine over fixed rates. However, one must ponder the worst case scenarios and be able to quantify ones ability to meet those payment obligations if indeed they arise.
FYI - Tanta. I didn't see anyone post on this recently, however sorry if it is a duplicate.
Rep. Barney Frank may "Win `Tougher Than Expected' Subprime-Lending Limits"
Frank May Win `Tougher Than Expected' Subprime-Lending Limits - Bloomberg.com
sorry folks....I should have just posted the link. No conspiracies here - just seeking objective opinion on a taboo subject in a politically correct country. I am not biased one way or other and frankly do not care. I will be back to Asia early next year, and will worry more about Chinese and Japanese in my spare time.
The ice floe method may have to be rethought with the opening of the Northwest Passage--no ice floes at hand.
Trollbro, if you want Greenspan chat, check the two last stories. I think you'll be pleasantly surprised. If you have an MMI entry link (a story that wields fine language the way ol' Greenspan utilized interest rates), this is where to put it.
Today we reflect on the age-old question: if a business reporter is not contributing to the success of the tribe, can we put it on an ice floe and let it float out to sea?
Ok. Time to fess up. Who floated out Sebastien?
Troll Bros - here's my objective opinion on a "taboo subject" in a politically correct country, in which one can find the most extreme form of anti-Semitism with a casual and unintentional google search, due to constitutionally protected free speech:
It's nonsense, you dork. Ask yourself why in heck Jews would be involved in any sort of conspiracy against the country that is by far and away the most free and the most hospitable to minorities of any group and newcomers? We sure aren't perfect, but then I have yet to find a country that is.
Get a grip on reality. If you are truly interested in economic reality, the resources, depth of discussion and breadth of contribution at this blog are an unmatched resource at the present time.
The reason why the Fed dropped rates so low was because of a little incident known as 9/11 coming on top of a recession, which took approximately 2T out of the economy. And furthermore, I refer you back to M-F's comments.
Maxed out: I can't speak to the issue of Greenspan and his economic activities, but as far as Jews and the US I think you should realize the following. Zionists Jews would probably put the interests of Israel ahead of those of the US if the two were in conflict. Many argue that Israel has worked to get the US embroiled in a war vs. the Muslim world for the benefit of Israel. In fact that is much of the thesis of the new book by Mearsheimer (U of Chicago) and Walt (Harvard): the Zionist Lobby works to skew US Middle East policy for the benefit of Israel and against the natural interests of the USA. Iraq war a case in point. It was eagerly wanted by Israel, but it is the US that has paid the price, totally.
I can't speak to the issue of Greenspan and his economic activities, but as far as Jews and the US
Well, James, there's your first big mistake. This blog is about finance and economics, not your beliefs about "Jews." I am not going to address your points. I am telling you to quit. Now.
People. People.
You have fallen into the trap that "Troll Brothers" set for you.
He/they/it has no interest in any dispassionate discussion of race, religion, and geopolitics. He/they/it put out bait and you swallowed it.
I deleted his first comment on this subject because I hoped it would keep this thread from degenerating. Trust ol' Troll, though, to make sure his disingenuous "I'm just asking" crap follow up put the bait back out.
Trolling = Bad faith discourse. It doesn't matter what the subject is. Troll just uses antisemitism because he knows it gets under everyone's skin.
IF YOU WANT TO ARGUE HIS THESIS, GO GOOGLE FOR SOME WEBSITE THAT IS ABOUT WORLD JEWISH CONSPIRACIES.
If you want this nice blog to stick to economics and finance, don't feed the troll.
I'll turn off the comments on this thread before I will allow it to attract every malicious nut on the internet who swarms to antisemitic discourse like flies to a carcass.
Don't feed the trolls.
Troll Brothers, next time I will just delete an offensive comment, not try to educate you about why your comment was edited. Do not give me any fake-innocent "I'm just raising a taboo" bull, kid. Your handle tells me that you understand what trolling is.
James - contemplate the weapons deals the US is making with various Arab countries frightened half out of their wits by Edgy Adji's habit of posing in front of dancers carrying vials purporting to contain nuclear material. It might do you good.
FWIW, there are not enough Jews in the US to make the US do anything the larger population doesn't want to do. If I were you, I'd start worrying about the worldwide Baptist/Biblical Christian conspiracy, because in my experience they express much stronger support for Israel than Jews. I await the next installment of the Protocols of the Baptist Elders with great anticipation. Have at it.
I'm tired of this nonsense, as traditional as it is in times of economic turmoil. It is not the Jeeeeeeews who are the problem, it is our own stupidity. Terrorists didn't do this to us. We did it to ourselves. It will be quite hard enough to recover from without worrying about Jews and bicycles.
Don't forget to ask yourself why property bubbles also exist in countries with nary a Jew to be found - or even a Baptist.
Sorry, Tanta, we crossed. I will obey in the future, but I hate to leave the last comment as a racist one.
As a southerner I have seen the effects of this sort of stupidity. It held us back for decades and decades.
MOM, every molecule in me wants to fight the good fight that you want to fight, as well.
I am with you in spirit 100%. It has been incredibly hard for me to learn not to argue with these people.
But the trolls know that about me, and they know it about you, and they know they can get us to spend hours trying to erase the foulness they leave behind them.
The only way to win the game is not to play. I know it feels to everyone as if we are leaving foulness uncontested, because that is what it means. I will delete anything I fear may get us into a really bad Google search situation. If I delete too much other stuff, Troll sees that as a challenge. The only way out is not to get in.
Please do not feel chastised. I fear for us precisely because we are decent people, not otherwise.
Back to those ice flows...and whether you are going to pull your fair share for the tribe or become an increasing burden (forget risk, man, we're tired of haulin your fatass around after those polar bears, you know?) [Now, here's your spear--Go get em!]
I think CR's photo gallery of Northern (and now crushed) Rock is coverage that would put him on one of those ice flows, possibly w/o spear. He is not working for the interests of the media tribe that need to see this issue as isolated, contained and competently managed.
I see so many instances where discussions link FOMC overnight rate and ARMs. To what extent are ARMs connected to the short-term rate? What exactly is that relationship? And what percentage of ARMs are adjusted in relation to LIBOR?
Yes, Tanta, I know you're right.
The worst of it is that this is the discourse that will drown out questions like "Did we create an incentive system for brokers to put people in nearly the worst loans possible?" And of course the answer to that question is yes, which might lead us all then to contemplate the difference in delinquency rates between, say, FNMA portfolios and various others....
If we could only bring ourselves to link the incentive with the result, now we'd be getting somewhere.
As for results, did you see the McDash free report for the 2007 opt-ARM/Hybrids vintage as of July? Kind of ghastly, I thought. Total delinquencies of 2.99%. Of course the majority were 1 month, but then with a weighted age of 3 months, that is not an encouraging stat.
If you're worried about rising rates, the solution is.. hold on, this may be shocking .. RENT.
Jim Gray's article represents precisely the kind of shocking ignorance that caused / extended / promulgated this bubble. Real estate prices do not always go up. Furthermore, there is absolutely no guarantee that you will find a buyer for your home even if you should choose to sell. Today, in every market, the probability that you will NOT sell your house is greater than the probability that you will.
[ Indeed, Tanta, i included the author's name precisely so the lovely spider from Google would link to your site. Good times! ]
The article did not include a single sentence about the fiduciary benefit of renting. The risk that you cannot sell your house is TREMENDOUSLY HIGH, not miniscule. You need to take into account the possibility that you'll be stuck with $400k or more of personal debt.
I submit to the readers that if you don't know anyone who is personally having trouble selling a house, you simply don't have enough friends. I work every day with one guy who pulled his house off the market here in Baltimore and have a very good friend from grad school who can't sell his old house in a different state (Ohio, incidentally.. an area that's theoretically nearly unaffected by the credit crunch ) after moving to accept a job. A third friend has already had his old condo foreclosed on.. he's under the age of 30.
If I'm navigating a path through the housing market, I want to be able to get out.. not be dragged down by it. Renting simply must be included in every discussion of housing mortgage options.
I think you need to weigh ARM loan benefits in a comprehensive manner, over time. [...] However, one must ponder the worst case scenarios and be able to quantify ones ability to meet those payment obligations if indeed they arise.
What percentage of ARM-holders do you believe do either of those things ?
My guess is fewer than one in ten.
"What percentage of ARM-holders do you believe do either of those things ?"
It's probably more than one in ten, but certainly not enough...