Good Article

[Sock_It_Away]

Good read:

http://www.washingtonmonthly.com/features/2004/0404.wallace-wells.html

Makes me leary of the refi to an ARM i just did.

I like to think that the refi allowed me more cash for these important years of accumulation. I have 535/month going into other investment vehicles as a way of increasing what I can accumulate these early years.

I think as long as my level of discipline remains high and I do not use the extra cash to fund careless spending habits, I should be OK in the long run.

 

[cute fuzzy bunny]

Yeah, I was wondering what the heck Al was smoking when he told everyone to go get ARM's. In a very stable interest rate environment that makes some sense because you'll get a reduction on the initial rate, and if things are stable, that should hold out for the first 4-6 crucial payment years when your payments are 90-something percent interest.

Makes absolutely no sense now, with rates at an all time low and anything BUT stability on the horizon. THAT'S when you want to lock in a fixed rate.

 

[BusyMom]

Don't get me going on the refi-frenzy....I'm a real estate appraiser and I see some people so often I'm invited to their kids b-day parties. I have lots of opinions..only some of which my husband says are interesting....but IMHO most people don't understand or care about anything other than "how much will it cost a month?"

Will always remember the $400K house I did where the wife crowed about how her interior designer created the living room paint to match her favorite orchid..and the beds were all mattresses thrown on the floors with milk crate furniture.

 

[cute fuzzy bunny]

The scuttlebutt is he was throwing a bone to his banker friends who will get killed when rates rise 3-4% and people dig in and keep their cheap mortgages through term while being able to buy fixed income investments yielding 6-8%.

I havent ever considered him a scumbag, but unless he feels strongly that he wont be raising the rates for 5+ years, it was fairly irresponsible and would qualify him for instant scumbag-hood.

 

[JWR1945]

Alan Greenspan has been very careful to keep the banking system solvent and profitable. I consider that to be a good thing. I do not want to see a recurrence of the Savings and Loan crisis, where short-term demand deposits paid more interest than long-term mortgages paid. And, it is true that Alan Greenspan has been very careful to signal his interest rate intentions far in advance. Again, I consider that to be a good thing.

In terms of mortgage rates and who gets hit if rates go up, it is the private investor who gets hurt. Very few banks attempt to make money by investing in mortgages. They make their money by putting them together and selling them to investors. The rate of return is much higher and the safety is much, much better.

Have fun.

John R.