Getting Knocked Down by Prime ARMs

[somdrenter]

Prime ARMs went to borrowers with good credit because they were less likely to default, right? Wrong

We've been reading a lot lately about how subprime mortgages have submarined the economy. Lenders and banks have been taken to the woodshed for irresponsibly giving money to home buyers with poor credit just so they could bundle up the mortgages and resell them as toxic residential-mortgage bonds. But, while there's no denying the subprime problem, on closer look it's clear that even prime borrowers were taking on more debt than they could afford….

…The rise in prime ARM foreclosure starts isn't isolated to a few states. Nationally, foreclosure starts related to prime ARMs jumped 253% in the third quarter of 2007 when compared to a year earlier….

…Maryland and Virginia, which also are among the states that have seen the greatest increase in prime ARM foreclosure starts, might have been hurt by an oversupply of new construction, which borrowers typically financed with variable-rate mortgages. Maryland prime ARM foreclosure starts increased 229% during the 12 months ending in the third quarter, 2007. Virginia, which like Maryland includes high-priced Washington, D.C., suburbs, had a 369% year-over-year increase….

Getting Knocked Down by Prime ARMs

[jazz lady (Premo)]

ARMs were taken out by people who did not do their research and bought WAY more house than they could afford. I have preached over and over again to peeps NOT to do an ARM loan and gave them many, many valid reasons why a fixed-rate is much better in the long run.

Caveat emptor.

[vraiblonde]

Originally Posted by somdrenter

But, while there's no denying the subprime problem, on closer look it's clear that even prime borrowers were taking on more debt than they could afford….

Well, there you go then. The simple solution would be to not take on more debt than you can afford.

[Wickedwrench]

Originally Posted by vraiblonde

Well, there you go then. The simple solution would be to not take on more debt than you can afford.

But isn't it more fun trying to keep up with the Joneses? It's the American way!


Wow, this place is dead without Patchy.

[Larry Gude (Premo)]

Originally Posted by vraiblonde

Well, there you go then. The simple solution would be to not take on more debt than you can afford.

...before and I'll say it again; I think the vast majority of the problems in the mortgage area is investors and speculators. Who is going to walk away from their home just because their mortgage went up $500 a month?

NO ONE. They will find a way.

Investors and speculators and flippers have taken out ARM's specifically to keep their out of pocket as low as possible until they cash in. They got caught. They made bad bets. We are talking about bailing out gamblers, not mom and dad.

[Pushrod]

Originally Posted by Larry Gude

...before and I'll say it again; I think the vast majority of the problems in the mortgage area is investors and speculators. Who is going to walk away from their home just because their mortgage went up $500 a month?

NO ONE. They will find a way.

Investors and speculators and flippers have taken out ARM's specifically to keep their out of pocket as low as possible until they cash in. They got caught. They made bad bets. We are talking about bailing out gamblers, not mom and dad.

I wonder if this is really true? Is there any articles you can post to substantiate this hypothesis? It sounds very plausible to me that this may have happened in the majority of the cases, but I would like to see some supporting documentation before I get completely on that bandwagon.

[Larry Gude (Premo)]

Originally Posted by Pushrod

I wonder if this is really true? Is there any articles you can post to substantiate this hypothesis? It sounds very plausible to me that this may have happened in the majority of the cases, but I would like to see some supporting documentation before I get completely on that bandwagon.

...I have not one shred of evidence or bundle of 'facts'. All I have is my gut telling me that if someone bought a $300,000 house for their family, the kids, school, the neighborhood, like most people buy houses for, and they need to come up with an extra $500 a month, they'll find a way before they lose the damn house.

My gut also tells me that the people who speculate on things, like housing, which became a sort of national pastime this last 8-10 years or so, are also the kind of people who know how to complain and who to complain to.

How many politicians you suppose, across the land, are stuck with property deals that aren't working out so well now that things have cooled?

[Pushrod]

Originally Posted by Larry Gude

...I have not one shred of evidence or bundle of 'facts'. All I have is my gut telling me that if someone bought a $300,000 house for their family, the kids, school, the neighborhood, like most people buy houses for, and they need to come up with an extra $500 a month, they'll find a way before they lose the damn house.

How many politicians you suppose, across the land, are stuck with property deals that aren't working out so well now that things have cooled?

I'm sure that there are a lot of those, including the politico's. I'm also sure that there are alot of families out there living paycheck to paycheck and an extra $500.00 a month would break them completely. So, who's fault would that be? I would have to put my finger squarely on the family that took out more of a mortgage then they could really afford along with the knowledge that it could increase overtime due to the ARM.

I would like to see how your hypothesis pans out though, how many were actually speculators and investors. It just might be the majority.

[vraiblonde]

Originally Posted by Pushrod

I'm also sure that there are alot of families out there living paycheck to paycheck and an extra $500.00 a month would break them completely.

Well, think about it this way:

If someone gets in financial trouble and needs an extra $500 a month to make ends meet or pay down debt, it's pretty simple to get a second part-time job.

On the other hand, if they got a second part-time job in order to afford their mortgage in the first place, then they bought too much house and were stupid.

[Pete (Premo)]

Originally Posted by somdrenter

Prime ARMs went to borrowers with good credit because they were less likely to default, right? Wrong

We've been reading a lot lately about how subprime mortgages have submarined the economy. Lenders and banks have been taken to the woodshed for irresponsibly giving money to home buyers with poor credit just so they could bundle up the mortgages and resell them as toxic residential-mortgage bonds. But, while there's no denying the subprime problem, on closer look it's clear that even prime borrowers were taking on more debt than they could afford….

…The rise in prime ARM foreclosure starts isn't isolated to a few states. Nationally, foreclosure starts related to prime ARMs jumped 253% in the third quarter of 2007 when compared to a year earlier….

…Maryland and Virginia, which also are among the states that have seen the greatest increase in prime ARM foreclosure starts, might have been hurt by an oversupply of new construction, which borrowers typically financed with variable-rate mortgages. Maryland prime ARM foreclosure starts increased 229% during the 12 months ending in the third quarter, 2007. Virginia, which like Maryland includes high-priced Washington, D.C., suburbs, had a 369% year-over-year increase….

Getting Knocked Down by Prime ARMs

Patch,

Does this mean that before you deleted your "Patch" account and had long conversations this MPD you were talking to yourself?