What are they going to refi into in 2006 and 2007 with rates rising now? The reason there is so much ARM activity is because these people cannot qualify for a fixed rate loan even at today's level.
Let not forget that the financial industry took a few hits over the latest BK laws when folks rushed to BK before the new law took effect.
I noticed all the reports were that the exec were 'surprised' at the rush and the losses but they would make it up in savings from the new law. I wonder if they will be surprised at what happens next.
Let's not forget that half of us can still use Chapter 7. Enterprising lawyers can screen debtors' income gratis to keep the party going, and make sure any inquiries get credit-counseled-up right away. Tax preparers will sell your returns for cross-referencing with FICO scores, permitting direct-mail bankruptcy solicitations. (Impossible? Has your tax preparer showed you a written privacy policy?) The legal deadline has jump-started the diffusion of this financial-service innovation, and the market's explosive growth phase has only begun!
dchog, most ARM holders i know have two reasons for their choices. one, they don't plan on staying the residence for at most 5 years. two, either when the ARM rate expires or if a lower rate become available before, they'll just refinance. what both groups fail to recognize is the possibility that rates could be sizably higher than today's. i've even heard a few quote the global savings glut and the fact that real estate is so critical to our national and global economy that rates will be kept low by hook or crook.
while this may be true, the hoped for outcome isn't a certainty and those taking ARMs should prepare for the worst case adjustment scenario according to their loan type. alas most only plan for the optimistic scenario.
"Most only plan for the optimistic scenario", because that has always paid off in the past. Think positive is even the message that school children learn, rather than think critically or cautiously.
Hope, trust and pray instead of think is the real message. (That way no child gets left behind because the rest of the children are not moving either.) [Who says I'm cynical?]
Good post CR. I'm sure the lack of competition that these guys have had in the last 2 years will cut a lot of the fat out of the paper work. That alone should lower house prices, advancing the view that the housing market is past its peak and only the fit (maybe dc) will survive.
bbb's note above sounds a little on the skeptical side until you wonder how much money has been spent on trying to get everyone into a home. For a measly 3% additional home mortgage payers ("owners" not quite/ever), we have spent a horrendous amount of dough, but I do not have the stomach to look for an estimate --way more than the Billion vader points out with the latest bankruptcy adjustments, way more than the ~$10B Fannie has "misstated" in its "earnings".
Ok time for my muzzle.
ARMs are now at a 3yr high. When all is said and doen I wonder if the 3% gain (66-69%) in home ownership will be lost.
What are they going to refi into in 2006 and 2007 with rates rising now? The reason there is so much ARM activity is because these people cannot qualify for a fixed rate loan even at today's level.
Let not forget that the financial industry took a few hits over the latest BK laws when folks rushed to BK before the new law took effect.
I noticed all the reports were that the exec were 'surprised' at the rush and the losses but they would make it up in savings from the new law. I wonder if they will be surprised at what happens next.
AFR.com - Sorry, we've encountered a problem
Let's not forget that half of us can still use Chapter 7. Enterprising lawyers can screen debtors' income gratis to keep the party going, and make sure any inquiries get credit-counseled-up right away. Tax preparers will sell your returns for cross-referencing with FICO scores, permitting direct-mail bankruptcy solicitations. (Impossible? Has your tax preparer showed you a written privacy policy?) The legal deadline has jump-started the diffusion of this financial-service innovation, and the market's explosive growth phase has only begun!
dchog, most ARM holders i know have two reasons for their choices. one, they don't plan on staying the residence for at most 5 years. two, either when the ARM rate expires or if a lower rate become available before, they'll just refinance. what both groups fail to recognize is the possibility that rates could be sizably higher than today's. i've even heard a few quote the global savings glut and the fact that real estate is so critical to our national and global economy that rates will be kept low by hook or crook.
while this may be true, the hoped for outcome isn't a certainty and those taking ARMs should prepare for the worst case adjustment scenario according to their loan type. alas most only plan for the optimistic scenario.
"Most only plan for the optimistic scenario", because that has always paid off in the past. Think positive is even the message that school children learn, rather than think critically or cautiously.
Hope, trust and pray instead of think is the real message. (That way no child gets left behind because the rest of the children are not moving either.) [Who says I'm cynical?]
Good post CR. I'm sure the lack of competition that these guys have had in the last 2 years will cut a lot of the fat out of the paper work. That alone should lower house prices, advancing the view that the housing market is past its peak and only the fit (maybe dc) will survive.
bbb's note above sounds a little on the skeptical side until you wonder how much money has been spent on trying to get everyone into a home. For a measly 3% additional home mortgage payers ("owners" not quite/ever), we have spent a horrendous amount of dough, but I do not have the stomach to look for an estimate --way more than the Billion vader points out with the latest bankruptcy adjustments, way more than the ~$10B Fannie has "misstated" in its "earnings".
Ok time for my muzzle.