Surprised the rate on your ARM increased?

Read that this morning. They oughta sue Greenspan for telling them to do it while he fully intended to extensively raise rates.

Nice deal for his banker buddies.

What really surprised me is it said that one of the couples refinanced to an ARM at something like 7%, thats since risen to over 10%? What the heck were they smoking:confused:
 
Some of these people either

a) had a very tough time qualifying for their house and HAD to use a variable to buy the house.

or

b) had crappy credit, used the house ATM to pay off the cards so that they could consume more, and were required by their crappy credit to take a variable loan

They were smoking the "I'm entitled" blend
 
"The bank doesnt want to loan you the money, and they loan money to almost everyone" should be the flashing, screaming "check engine" light of the personal finance world... ;)
 
Getting yourself into an ARM when interest rates are close to 40 year lows.. Which direction would you expect rates to go ?  :confused:
 
My guess is that people who end up with terrible deals like this just walked into the local bank or mortgage broker's office, asked for a mortgage, were offered this one, and signed on the myriad dotted lines. No research, no comparison shopping, no wondering if their house (or any house) was affordable or whether there are alternative ways to handle their debt, just trust...in the nice man with the gold nameplate at the bank, in their own good fortune, in the Deity.
 
From what I'm reading ... most of these folks refinanced to pay off bills. I suspect Blaster is right on ... they all had subpar credit and fell right into the hands of predatory loan companies...

And what's up with this guywho bought a house in Georgia with an interest-only loan and thought within 6 months he'd be selling? Too many episodes of "Flip this House"?
 
VoyT said:
Too many episodes of "Flip this House"?
Click to expand...

OMG I HATE those types of shows...they're very superficial
 
"At the time of the loan, they tell you, 'Well, it may go up, but it's probably going to go down.' You want it to be so, so you believe it."
Click to expand...

It doesn't say when they took out the loan, but considering that the rate increased 350 bp from 7% to 10.5%, it seems as if they went into the ARM when the Fed was at 1.25% . . . after the very first increase. Telling these folks "it's probably going to go down" is criminal.
 
And why is his ARM Mortgage higher than my 20 year fixed in San Diego?  These examples make a good story on the surface, but they don't pass the smell test.  Not typical, even for spendthrift Americans.

Not to get too off topic, but while I like to bash predator businessmen/legal loan sharks as much as the next guy, I don't feel much sympathy for people in over their heads on mortgages.  People will spend 40 hours figuring out their NCAA brackets or football pools, but can't go to lending tree or do a little research to make sure when they sign the most important documents (probably) in their life, they aren't getting a raw deal?

My MIL just vented to me she thought she was going to lose the house. She and FIL seperated about a year ago (total mid life crisis-whatever), he's paying ~$1,000 a month (they have two kids still under 18), and they bought their house over ten years ago for ~$120,000, and she makes a pretty good wage, 20 years in a govt. job.  Yet somehow she can't make what should be $1200-$1300 payment, tops?

I tried to help her, but it was no use, run up credit cards, refinance and pay off.  Nail in the coffin was getting a pool put in right before they seperated.  On the one hand, she admits she wouldn't have done it if she had known what was coming, but it should have never been that close to the edge in the first place.  

Even still, I tried to sit down with her and work the numbers, figure out what she can do.  The more I dived in, the more my head was reeling, $200+/month on "whole" life insurance on the kids?  How much for car insurance?  I told her what she needed to do, I garantee she hasn't done it.  And six months from now things will be even worse and she won't remember this conversation.  

I love her very much, she is the best MIL one could ask for in many ways, but she suffers from a mental block that I just don't think is curable.  I told DW that if it comes to it, we'll buy a bigger house and have her move in, pay us rent that is equivalent to the difference in the house payment.  She's great with her grandaughter, and I couldn't bear the thought of her living anyplace but a nice home.  :-\
 
Yeah it's the banks fault these people were so gullible.

Out here we call that the stupidity tax.
 
Read that this morning. They oughta sue Greenspan for telling them to do it while he fully intended to extensively raise rates.
Click to expand...

I remember that and thinking wtf:confused: Funny how this story mentions "other bills" that people need to pay off. No need to go into detail on what crap they spent on and have the story rather point the finger at the banks.
 
Does anyone remember Southern California real estate in the late 80's - early 90's? People were dropping off their keys to the lenders. Sad time for residential and commercial property.
 
no doubt these surprised individuals are among the "40% of Americans over 55 (who) had savings and investments totalling less than $25,000" (see topic)

this might indeed be the "stupidity tax",  but the lottery that they "plan to win" to finance their retirements is undoubtedly the "idiot tax"

... makes you wonder about folks, doesn't it?
 
a short while back a major network broadcasted a similar story about this couple who had to give up their mini-mansion. they showed the woman coming downstairs into her two-story height living room that she had to part with and portrayed them as victims of circumstance.

i watched this from the cozy florida room of my 1200 sf shotgun cottage (probably worth more than their mini-mansion) and much to my surprise, i had trouble sympathizing with her.
 
Now, the real estate market is cooling, interest rates are rising and tens of thousands more Americans are starting to have trouble paying their mortgages. Nearly 25% of mortgages - 10 million - carry adjustable interest rates. And most of them went to people with subpar credit ratings who accepted higher interest rates, according to the Mortgage Bankers Association.
Click to expand...
Nearly 25% of mortgages are ARMs? Mostly to people with sub-par credit?

Now that's scary!

Audrey
 
audreyh1 said:
Nearly 25% of mortgages are ARMs?  Mostly to people with sub-par credit?

Now that's scary!

Audrey
Click to expand...

In the bubble markets of CA and other places (Denver, et al.), over 50% of the mortgages taken out in 2005 were a particularly pernicious variety known as the "option ARM". Google that phrase and see why there arre big problems ahead for certain real estate markets.
 
Robert, now 78, was working as a deliveryman. But his employer went out of business last April. Now he and Lorraine, 72, a retired nurse, are both seeking work. The rate on their mortgage has jumped from 7% to 10.5%.
Click to expand...

Hey Robert, I spell it out for you ...

R-E-V-E-R-S-E M-O-R-T-G-A-G-E.

Note to self: ya can't take it with ya.
 
tryan said:
Hey Robert, I spell it out for you ...

R-E-V-E-R-S-E M-O-R-T-G-A-G-E.

Note to self: ya can't take it with ya.
Click to expand...

Good idea except "When they refinanced their home two years ago to pay off some bills...". Those "bills" probably sucked all the equity out of their house. They are probably in debt up to their eyeballs and have zero equity in the house TO get a reverse mortgage on.

I do feel sorry for him a little though, since he's 78 and the bills were probably incurred for medical reasons.
 
Hummmm

I started with a 7.875% mortgage in 1996 which we changed to a 6% for no cost with the same bank in 2000, then went to a true 3/3 ARM at 3.875 in 2003 which is now going to 5.875 for the next 3 years, BUT I have the house on the market, never took out any equity when we refied and costs were negligible so my house will sell in the 500,000 range and owe 199,000. Bought the place for 236,000 in 1996.

The Arm worked for me, BUT I know what I am doing. Heck the max it could go is 9.5% on the life of the loan if I stayed but if I was staying I would refi to a fixed soon.
 
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