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Old 02-08-2009, 07:54 PM   #21
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I think that the negative ARMs will largely get renegitated to amortizing loans, assuming the properties are owner occupied and the owner wishes to stay put. Otherwise, foreclosure is it.

But I take issue with the whole notion that being upside down is taht big a deal. I dunno about the rest of you, but I could care less what the market value of my home is. I bought it because I wanted to live here and I took out a mortgage that I will pay off after a reasonable amount of time. Since I don't have any interest or plan on moving, I don't care what the market value is.
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Old 02-09-2009, 12:29 AM   #22
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I guess things are good as long as the mortgage rates are relatively low. And hopefully, while the rates are low, people living in these houses accumulate enough equity in their houses and save some money on the side even (or the housing prices miraculously recover to offset the negative equity) so they can refinance in time to lower their monthly mortgage payments again. Otherwise things could still get pretty ugly.

With Alt-A Option-A resets coming up in the next two years or so... Hmm... I don't know...

http://1.bp.blogspot.com/_1V7wnZxPqo...eset%2Bimf.jpg

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Old 02-09-2009, 12:33 AM   #23
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I dunno about the rest of you, but I could care less what the market value of my home is. I bought it because I wanted to live here and I took out a mortgage that I will pay off after a reasonable amount of time. Since I don't have any interest or plan on moving, I don't care what the market value is.
brewer, you are right. As long as you plan to live in the house for life, it doesn't really matter as long as you won't find yourself in a ghost block with many abandoned foreclosures.

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Old 02-09-2009, 11:17 AM   #24
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But I take issue with the whole notion that being upside down is taht big a deal. I dunno about the rest of you, but I could care less what the market value of my home is. I bought it because I wanted to live here and I took out a mortgage that I will pay off after a reasonable amount of time. Since I don't have any interest or plan on moving, I don't care what the market value is.
This was true for me after the big TX real estate crash in the 80s. I was underwater for many years, but I never even thought about it, because I needed to live somewhere and I had bought convenient to work and liked the place just fine and could meet the payments.

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Old 02-09-2009, 12:32 PM   #25
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This was true for me after the big TX real estate crash in the 80s. I was underwater for many years, but I never even thought about it, because I needed to live somewhere and I had bought convenient to work and liked the place just fine and could meet the payments.

Audrey
On the other hand (speaking of "underwater"), until 2005 I thought I would live in New Orleans no matter what, until I took my last dying breath. I wanted a home town at last, and warts and all, by George, New Orleans was it as far as I was concerned. Then Hurricane Katrina changed my plans.

Luckily I was not flooded, and I am not underwater as far as the value of my home, either. I'm just saying that you never know what life will throw at you, and how your plans may change. Being underwater makes it more difficult to respond flexibly to the unexpected.
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Old 02-09-2009, 12:55 PM   #26
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why are some people who could qualify for one taking the ARM instead? I can only think of a few possible reasons:
1) "I've got the money to pay the whole thing off, and will do so if rates climb. For now I just want the lowest rate possible." That's reasonable--but if rates take off because of inflation, wouldn't it be best to have a locked-in 5.5% 30 yr mortgage and pay it off slowly with ever-less-valuable dollars?
2) "I like these rock-bottom ARM rates now, and I'll get a fixed rate mortgage if it looks like rates will shoot up." Seems pretty risky--being able to reliably foretell the upcoming interest rates ahead of their climb and betting that cheap long-term $$ will be available as the liquidity "crisis" continues.
3) "I don't want to lock in a 30 yr fixed because I think rates will go down." Maybe so--but there's not much "down" and there's lots of "up" from here.
Those are the reasons that make sense; I'd venture a guess that makes up about 10% of the people who have used ARMs.

The other 90% is made up of:
4) People who are buying more house than they can afford, and can only swing it by taking on a risky ARM loan (they either do this knowingly, or just sign whatever is put in front of them by brokers eager to push the deal through).
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Old 02-11-2009, 10:20 AM   #27
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Lower interest rates are certainly going to help this out, but other factors are the high rate of un- (or under)emplyment and the reduced asset value of households. I don't think we've dodge this bullet completely yet.
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