Mortgage mess claims new victims


jag4life said:
The "markets" meaning the stock markets?

The financial industry going down is not the same as the airline or rail industry being in trouble. Believe me the government needed to intervene. Why do you think anything the Fed chairman raises and lowers the interest rate to the banks so often?
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I mean the financial markets. I understand why the Fed raises and lowers interest rate, but this is different. This is government intervention on behalf of corporate greed and malfeasant. These problems were induced by the financial industry. With government intervention, there should be a price paid by the corporations and their leaders for their malfeasant.
 
Olde Hornet said:
What about 14% interest rate on mortgages? And yes, so many of these people were on the edge that those "minor" movements in interest rates have pushed people over the edge. You are missing whats going on, mortgages were given to a LOT OF HIGH RISK people. There was a woman that called in last night on the Suze show on CNBC and the "minor" increase in mortgages is pushing her over the edge. The industry took HUGE risks!

Read some of the stories you will be SHOCKED! If I can find some of them, I will share them with the board.
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So, if a MINOR movement in the interest rate pushed a person over the edge, then they were BOUND to go over the edge REGARDLESS. They were on flat tire, one bad transmission, on medical emergency, one paycheck away from going over the edge. They simply blamed it on the IRATE.
 

Olde Hornet said:
I mean the financial markets. I understand why the Fed raises and lowers interest rate, but this is different. This is government intervention on behalf of corporate greed and malfeasant. These problems were induced by the financial industry. With government intervention, there should be a price paid by the corporations and their leaders for their malfeasant.
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Lowering the Fed rate is gov't intervention also. It is not different. The Fed rate being lowered helps to encourage borrowing by consumers. People being in debt is crucial to the U.S. economy.
 
Da_Sperm said:
So, if a MINOR movement in the interest rate pushed a person over the edge, then they were BOUND to go over the edge REGARDLESS. They were on flat tire, one bad transmission, on medical emergency, one paycheck away from going over the edge. They simply blamed it on the IRATE.
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The FEDs should not bail out the financial industry unless a price is paid by the executives. The higher interest rates did pushed these people over the edge. If they would have stayed in the rental market, they would have been fine. The financial industry pursued these people. These were bad loans and they knew it, they were packaged and moved along like a hot potato.
 
jag4life said:
Lowering the Fed rate is gov't intervention also. It is not different. The Fed rate being lowered helps to encourage borrowing by consumers. People being in debt is crucial to the U.S. economy.
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The rate that was lowered was the one charged to banks for borrowing money, these short term loans used by the banking industry.
 
jag4life said:
How?
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With a fixed rate mortgage, your note will remain the same throughout the life of the loan. If your P&I is $1000/month, then it will be $1000/month for the term of the long.

With an ARM, if your initial P&I is $1000/month and you want it to be $950/month by the time it adjusts, you simply pay more on the loan. The P&I is determined by the IRATE, LOAN BALANCE, and remaining term of the loan each time the mortgage adjusts. This may require you to pay an extra $200 per month. Putting and extra $200/month on the FIXED RATE loan does nothing to change how much your payment will be.

Secondly, even if you decide not to put any extra money on the ARM note, the savings of being in an ARM initially could be used to fund a 401K, IRA, college fund, or any other investment vehicle.

In the end, if you chose an ARM, you have to make that ARM work for you (in the big scheme of your financial life).

The ARM I have gave me a initial rate of 4.375% for 5 years. It can only adjust 2 points at worst and can't go higher than 10.375% over the life. I have less than 2 years remaining on my initial 5 years. My goal was to only stay in this house for 7 years. The worst that can happen to me is I pay 6.375% in year 6 and 8.375% in year 7. However, I have knocked down the principal a lot in 3 years. The house has appreciated over $100K in 3 years.

I saw no point in getting a fixed rate loan for something I only wanted to keep for 7 years. The money I saved with getting an ARM is being used in other investment vehicles each month. Which is about $200/month. Thats $200 per month over 5 years (or $10K) that gets invested in ME with interest.

Of course this approach doesn't work with SUB-PRIME loans, which jump from 5% to 14% in one year. There are good ARMS out there.
 
Olde Hornet said:
The FEDs should not bail out the financial industry unless a price is paid by the executives. The higher interest rates did pushed these people over the edge. If they would have stayed in the rental market, they would have been fine. The financial industry pursued these people. These were bad loans and they knew it, they were packaged and moved along like a hot potato.
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WRONG!!! When rates go up, so do RENT RATES. You can well believe that if I'm a landlord and my mortgage goes up, I simply pass that cost along to the RENTER. When I was a renter, my rent would go up at the end of every lease. I never understood why until I became a LANDLORD.
 
Da_Sperm said:
WRONG!!! When rates go up, so do RENT RATES. You can well believe that if I'm a landlord and my mortgage goes up, I simply pass that cost along to the RENTER. When I was a renter, my rent would go up at the end of every lease. I never understood why until I became a LANDLORD.
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Most apartment complexes are not on ARMs. That means you are using ARMs on your rental properties, not a fixed rate. Rates might go up, but it has nothing to do with ARMs. There are tons of other costs that go up beside the ARMs, when you buy vs rent. Your costs for the following are larger in a house are higher and subject to increases than when you are in an apartment:

1. Property / earned income / other taxes
2. Heating & Cooling
3. Repair and maintenance
4. Insurance

Your portion as a renter of those costs vs as an owner is a different world. The other thing about staying in a rental is that you can move to a cheaper rental, shop around. Once you have a mortgage, your options are not as easy.

So as you see its a different world as a mortgage holder vs renter. You can see why these people will be pushed over the edge in a house where they would not in an apartment.

I dont think you have ever raised your rent by $400 a month.

"They increased my payments by $400 a month," said Glover. "So now I've gone from $1,200 to $1,500 to $1,945."

http://minnesota.publicradio.org/display/web/2007/08/09/lending/
 
jag4life said:
Exactly. It encourages banks to lower their rates because the rates they (the banks) pay the gov't are lower.
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I am sorry you missed understood why this money is borrowed, this is not borrowed to loan money to consumers, its done as an interim loan to the bank to keep them solvent as money changes hands.
 
Most apartment complexes are on ARMS. ARMs are a way to increase CASH FLOW for Real Estate Investors. When the ARM goes up, the landlord passes the cost onto the renter. When the ARM goes down, it simply increases the cash flow of the landlord because he will charge the same rent, but pay a lower mortgage.

All of the cost you mentioned below are the same cost incurred in any rental property (heating/ac, repair & maintenance, taxes, insurance). You as a rental will pay all of those cost plus other cost (such as vacancy rate), PLUS a monthly PROFIT to the landlord. You incur MORE COST as a renter than you do as a buyer. Who is going to rent to you cheaper than it cost them to buy the property they are renting out?

If I buy a rent property and the mortgage is $600/month. I would be a FOOL to rent it out for $500.

"
The burgeoning problem is tied to the collapse of the subprime mortgage market, which catered to people who, in many instances, could ill-afford the loans they took on."

Subprime loans are not your typical ARMs. These loans are loans given to people who could not get loans at a PRIME RATE with the HOPES that these people would get their credit straight in a few years and REFINANCE with another lender for an "A-PAPER" loan (PRIME). These loan companies never intended to hold the note at a prime rate for these customers who where already credit challenge. So, in order to get out of the note, the mortgage company JACKS the rates up so high that 1) the buyer either re-fi with someone else, or 2) walks away from the property.

What do you EXPECT when you are given a loan and you know your credit history didn't make you worthy of getting a PRIME loan in the first place.
 
Olde Hornet said:
I am sorry you missed understood why this money is borrowed, this is not borrowed to loan money to consumers, its done as an interim loan to the bank to keep them solvent as money changes hands.
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I understand all of that. It is all connected. Less expenses for the banks... more incentives they can offer to borrowers.
 
Da_Sperm said:
Most apartment complexes are on ARMS. ARMs are a way to increase CASH FLOW for Real Estate Investors. When the ARM goes up, the landlord passes the cost onto the renter. When the ARM goes down, it simply increases the cash flow of the landlord because he will charge the same rent, but pay a lower mortgage.

All of the cost you mentioned below are the same cost incurred in any rental property (heating/ac, repair & maintenance, taxes, insurance). You as a rental will pay all of those cost plus other cost (such as vacancy rate), PLUS a monthly PROFIT to the landlord. You incur MORE COST as a renter than you do as a buyer. Who is going to rent to you cheaper than it cost them to buy the property they are renting out?

If I buy a rent property and the mortgage is $600/month. I would be a FOOL to rent it out for $500.

"
The burgeoning problem is tied to the collapse of the subprime mortgage market, which catered to people who, in many instances, could ill-afford the loans they took on."

Subprime loans are not your typical ARMs. These loans are loans given to people who could not get loans at a PRIME RATE with the HOPES that these people would get their credit straight in a few years and REFINANCE with another lender for an "A-PAPER" loan (PRIME). These loan companies never intended to hold the note at a prime rate for these customers who where already credit challenge. So, in order to get out of the note, the mortgage company JACKS the rates up so high that 1) the buyer either re-fi with someone else, or 2) walks away from the property.

What do you EXPECT when you are given a loan and you know your credit history didn't make you worthy of getting a PRIME loan in the first place.
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I could not agree more with your last paragraph!!!
 

Olde Hornet said:
I could not agree more with your last paragraph!!!
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Unfortunately, things happen to people who don't have credit issue that may cause them to go into FORECLOSURE. I talked to a guy who runs a SMALL BUSINESS that delivers products for a local furniture store and Best Buy. He owns two trucks. One truck needed its engine repaired and was out of commission for 2 months and the furniture store he delivered furniture for went bankrupt and didn't pay him for his month of deliveries. This set his business back 4 months. He was only able to operate one truck, which didn't cover the expenses of two trucks plus salary for him and his workers. One Sept 1st, his house goes into foreclosure.

He was forced to make a decision on using his money to 1) get the truck fixed so that his business could still operate or 2) pay his mortgage. His mortgage is about $2400/month. He got 4 months behind.

He said he had to chose the business because if he let the truck go back, then we wouldn't be able to work at all. At least with both trucks operating, he can afford to rent a house or something.

Now, I say all that to say this. If his mortgage is an ARM, it will go down as yet another mortgage with an ARM that goes into foreclosure, when the truth is it is a mortgage to go into foreclosure because of a problem with his SMALL Business.
 
^^^ Murphy's Law in full effect. I wonder if we should plan and prepare for Murphy before we get into debt? This guy's situation seemed to be a ticking time bomb waiting to explode. It was inherently too risky and, in my opinion, he probably would make different choices concerning his level of debt if he had it to do over again.

Debt ... in general ... is the cause of so much stress and anxiety in our lives. I can't wait until I become debt-free.
 
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