Right on Schedule.

[JayB]

Never saw this coming.

 

"Nightmare Mortgages

 

They promise the American Dream: A home of your own -- with ultra-low rates and payments anyone can afford. Now, the trap has sprung

 

For cash-strapped homeowners, it was a pitch they couldn't refuse: Refinance your mortgage at a bargain rate and cut your payments in half. New home buyers, stretching to afford something in a super-heated market, didn't even need to produce documentation, much less a downpayment.

 

Those who took the bait are in for a nasty surprise. While many Americans have started to worry about falling home prices, borrowers who jumped into so-called option ARM loans have another, more urgent problem: payments that are about to skyrocket."

 

Businessweek

[catbirdseat]

I like this quote:

 

The option ARM is "like the neutron bomb," says George McCarthy, a housing economist at New York's Ford Foundation. "It's going to kill all the people but leave the houses standing."

 

Those houses are going to go on the market and depress prices.

[JayB]

The availability of those loans also played a significant role in elevating prices. Take a look at I/O's, option arms, etc as a percentage of total loan origination and compare that to home-price increases in a given market and you have a pretty strong correlation, especially in coastal markets.

 

If mortgage lending were governed by the same rules and regulations that investment companies have to follow when dealing with retail customers, this situation never would have developed. When you are dealing with a stock broker, your knowledge of financial markets, income, liquid assets, etc all determine how much risk they'll permit you to take - and they are subject to disciplinary action if they permit people to assume more risk than they are qualified to handle.

[Mr_Phil]

Cool. I'm still waiting to buy.

 

Of course, these stupid loans are partially responsible for the skyrocketing home prices. Again proving that people are just bad at math.

[Jim]

What were those people thinking? More evidence that a lot of folks run their finances as the Bushies run the federal treasury.

 

10 yrs to go on the 4.1% fixed 15 yr mortgage

[JayB]

What were those people thinking? More evidence that a lot of folks run their finances as the Bushies run the federal treasury.

 

10 yrs to go on the 4.1% fixed 15 yr mortgage

 

Pretty impressive. That's like a 2%-and-dropping real interest rate.

[Jim]

Needless to say I'm in no rush to pay it off early.

[JayB]

Cool. I'm still waiting to buy.

 

Of course, these stupid loans are partially responsible for the skyrocketing home prices. Again proving that people are just bad at math.

 

[Mr_Phil]

Interesting map. I guess this proves the cc.com assertion that the smart people live on the West coast and the NE and the stupid folks live in the middle of the country and the south.

[TREETOAD]

I guess they can all live in the Hummers they bought with the money they saved on mortgage payments.

 

Oh, yes we are the people running in the race,

Buying up the bargains in the old marketplace,

Another sale on something, we'll buy it while it's hot

And save a lot of money spending money we don't got

[Fairweather]

Interesting map. I guess this proves the cc.com assertion that the smart people live on the West coast and the NE and the stupid folks live in the middle of the country and the south.