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Re: Real estate slowdown evidence...
Old 12-13-2005, 08:49 AM   #21
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Re: Real estate slowdown evidence...

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Originally Posted by brewer12345
I think a lot of the pain has been delayed because 1) long term rates really haven't moved up much and 2) there has been a lot of questionable innovation (Option ARMs, etc.) in the mortgage marketplace.* I don't know what it will take to shift #1, and apparently neither does the Fed.* #2 will change and very possibly pretty soon, since there are some impending regulatory changes coming.* Either that, or a loose mortgage lender will suddenly have very public portfolio problems and the markets will run away from screwy mortgages.* You can imagine what that will do to RE, especially in the worst bubble markets.
Exactly. I don't know what other creative scheme the mortage companies can come up with to prolong the inevitable. Maybe "accrual mortgages" where no payments are due for 6 months, followed by steadily increasing monthly payments (while interest keeps accruing) with catch-up payments toward the end of the mortgage?
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Re: Real estate slowdown evidence...
Old 12-13-2005, 10:34 AM   #22
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Re: Real estate slowdown evidence...

It sounds like there's going to be a bonanza of foreclosures in white-hot areas.
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Re: Real estate slowdown evidence...
Old 12-13-2005, 10:56 AM   #23
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Re: Real estate slowdown evidence...

Quote:
Originally Posted by retire@40
Exactly.* I don't know what other creative scheme the mortage companies can come up with to prolong the inevitable.* Maybe "accrual mortgages" where no payments are due for 6 months, followed by steadily increasing monthly payments (while interest keeps accruing) with catch-up payments toward the end of the mortgage?
They won't have a chance. The regulators are already indicating that they will be restricting the existing negative amortization products, not allowing the creation of new ones.

Put it this way: when the time comes, I will be ready to buy my vacation home on the cheap.
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Re: Real estate slowdown evidence...
Old 12-13-2005, 10:59 AM   #24
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Re: Real estate slowdown evidence...

Rates for products like 15 and 30 year fixed mortgages haven't budged much, but other products that can adjust more quickly, like 1-year ARMs and especially HELOCs have gone through more of a pinch. HELOCs rates are tied into the overnight lending and prime rates, so when that rate goes up, the HELOC rate does as well. I think fixed mortgage rates are tied in with T-bills or something like that, which don't fluctuate as much. I forget what ARMs are tied into.
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Re: Real estate slowdown evidence...
Old 12-13-2005, 11:07 AM   #25
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Re: Real estate slowdown evidence...

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Originally Posted by Andre1969
Rates for products like 15 and 30 year fixed mortgages haven't budged much, but other products that can adjust more quickly, like 1-year ARMs and especially HELOCs have gone through more of a pinch.* HELOCs rates are tied into the overnight lending and prime rates, so when that rate goes up, the HELOC rate does as well.* I think fixed mortgage rates are tied in with T-bills or something like that, which don't fluctuate as much.* I forget what ARMs are tied into.
They are all tied to what investors in MBS require. Plain and simple. The MBS investors usually require LIBOR or treasury rates plus a spread to make up for both the potential credit risk and the optionality/negative convexity typical of mortgages.
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