Getting Knocked Down by Prime ARMs

somdrenter

somdrenter

Sorry, I'm not Patch...
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
:lalala:
 
jazz lady

jazz lady

~*~ Rara Avis ~*~
PREMO Member
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. :coffee:
 
vraiblonde

vraiblonde

Board Mommy
PREMO Member
Patron
somdrenter said:
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….
Click to expand...

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

Larry Gude

Strung Out
I've said this...

vraiblonde said:
Well, there you go then. The simple solution would be to not take on more debt than you can afford. :shrug:
Click to expand...

...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

Pushrod

Patriot
Larry Gude said:
...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.
Click to expand...

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

Larry Gude

Strung Out
Nope...

Pushrod said:
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.
Click to expand...

...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

Pushrod

Patriot
Larry Gude said:
...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?
Click to expand...

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

vraiblonde

Board Mommy
PREMO Member
Patron
Pushrod said:
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.
Click to expand...

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

Pete

Repete
somdrenter said:
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
:lalala:
Click to expand...

Patch,

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

MMDad

Lem Putt
Three years ago, due to some bad choices and unfortunate circumstances, I got an ARM. It's due to reset in April. When I got the ARM, I planned on converting it to a fixed before it reset.

I go to closing next week on 5.5% fixed. My credit rating is okay, but by no means great. We don't make much more $ now than we did then. It couldn't have been easier for me to get the loan, and I didn't even have to use the gubbmint's bail out program.

Who are these people having such a hard time? There are government backed programs in place for most homeowners to bail them out. If we're only talking about speculators getting in trouble, who cares? That's the risk they took.
 
somdrenter

somdrenter

Sorry, I'm not Patch...
Larry Gude said:
...this isn't exactly what we're talking about then, is it? Anyone who is so well off that they can afford to just walk away from one house AND go buy another isn't exactly in need of any government help, now are they?
Click to expand...

Sorry Larry, looking back through the thread I didn’t see any mention of the government bailout programs.

I was referring to the:
Larry Gude said:
...NO ONE. They will find a way.
Click to expand...
theory you have. Apparently, given the two examples I provided, someone will chose foreclosure as their best route. In either of the two examples given, the result is the same. No reduction in housing inventory, and further downward pressure on prices.
 
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