The mortgage bomb looms

[southsider2k5]

http://money.cnn.com/2006/10/09/real_estat...06100911cnn=yes

 

In the past two years, homeowners took out 1.3 million ARMs with teaser rates below 2 percent, according to Cagan's research.

 

Of those, 21.5 percent have negative equity, where the market value of the home is less than the amount owed. The number of people in that spot could go up significantly if home prices fall as forecast or if homeowners with teaser-rate-ARMs experience job loss, illness, divorce or a death in the family, which are the main causes of mortgage default.

[kapkomet]

Oh no's... this ought to be fun.

[sox4lifeinPA]

I need to get a decent job and mop up on the foreclosures....

 

arms are for idiots or short term mortgages.

[mr_genius]

housing prices were way too high before. the market needs a correction

[NUKE_CLEVELAND]

People who thought they were getting over on the system and getting themselves into houses they really couldnt afford are about to really get it. How much does anyone want to bet me that Lou Dobbs or some other idiot will get on TV and somehow blame the President for this and start another class-warfare cry-fest.

 

Score another point for living within your means.

 

 

[Steff]

People who thought they were getting over on the system and getting themselves into houses they really couldnt afford are about to really get it. How much does anyone want to bet me that Lou Dobbs or some other idiot will get on TV and somehow blame the President for this and start another class-warfare cry-fest.

 

Score another point for living within your means.

 

 

Ding, ding, ding, ding...

[kapkomet]

People who thought they were getting over on the system and getting themselves into houses they really couldnt afford are about to really get it. How much does anyone want to bet me that Lou Dobbs or some other idiot will get on TV and somehow blame the President for this and start another class-warfare cry-fest.

 

Score another point for living within your means.

Now that's very true.

 

Having said that, I think it's really crappy for people to get baited like this, not really knowing what they are getting into. They get sold on the low payment, and not really think about the ADJUSTMENT part. Now yes, they should have thought about it, but most people don't. It's just another mechanism to rip people and make money.

[Chisoxfn]

I need to get a decent job and mop up on the foreclosures....

 

arms are for idiots or short term mortgages.

No offense, but your last sentence is completely laughable.

 

Now that's very true.

 

Having said that, I think it's really crappy for people to get baited like this, not really knowing what they are getting into. They get sold on the low payment, and not really think about the ADJUSTMENT part. Now yes, they should have thought about it, but most people don't. It's just another mechanism to rip people and make money.

Or when properly used its a tremendous way to get people into home's and allow them to ease into the whole home buying experience (especially people that are younger who will make considerably more money in the coming years).

 

It can also be tremendous if you plan on flipping your property in a couple years. Of course right now wouldn't exactly be the time to buy if you were planning on flipping in a couple years (unless you had some real connections and found some steals that needed refurbishing but you would be able to do it very cheaply; these are much harder to find than the general public thinks though).

[sox4lifeinPA]

I wonder if Chisoxfn works for a realtor................................................ /thedeepestforestgreeninhistory

[kapkomet]

No offense, but your last sentence is completely laughable.

Or when properly used its a tremendous way to get people into home's and allow them to ease into the whole home buying experience (especially people that are younger who will make considerably more money in the coming years).

 

It can also be tremendous if you plan on flipping your property in a couple years. Of course right now wouldn't exactly be the time to buy if you were planning on flipping in a couple years (unless you had some real connections and found some steals that needed refurbishing but you would be able to do it very cheaply; these are much harder to find than the general public thinks though).

The caution is, you have to know your market - REALLY understand it. Most people don't. That's my point. They focus on the payment, and they aren't thinking about the other side.

 

Listen to the ads for ARMs. Not now, but two years ago.

 

(stupid announcer guy voice)

 

Now YOUUUUUUUUUU can have a $500,000 mortgage for just $499 a month. Call me NOW to find out HOWWWW...

 

(/end)

 

That baits people. And it's a quick sell for realtors.

 

Again, I'm not saying that it's NOT for everyone, but you have to be careful, and most people don't understand that. You do, Steff does, "finance types" do, but I think I said the same thing when this came up before, most people don't.

[southsider2k5]

The caution is, you have to know your market - REALLY understand it. Most people don't. That's my point. They focus on the payment, and they aren't thinking about the other side.

 

Listen to the ads for ARMs. Not now, but two years ago.

 

(stupid announcer guy voice)

 

Now YOUUUUUUUUUU can have a $500,000 mortgage for just $499 a month. Call me NOW to find out HOWWWW...

 

(/end)

 

That baits people. And it's a quick sell for realtors.

 

Again, I'm not saying that it's NOT for everyone, but you have to be careful, and most people don't understand that. You do, Steff does, "finance types" do, but I think I said the same thing when this came up before, most people don't.

 

And there you go. By and large the general public has no idea about financial tools. When they have their banker tell them that this is a good idea, and that the person can afford it, and you mix in a dose of appraiser who would say my ass is really a $500,000 condo, and you have a recipe for disaster.

[Texsox]

How much does anyone want to bet me that Lou Dobbs or some other idiot will get on TV and somehow blame the President for this and start another class-warfare cry-fest.

 

Score another point for living within your means.

 

 

 

Or just have the party faithful start the comments, why wait.

 

The finance close is the fastest and easiest close in the world. Works for all big ticket items. Look at cars. Six year auto loans. I remember when three was the standard and four almost unheard of. Why? To sell lower payments and get people into more expensive vehicles.

 

Historically, mortages are about the safest loan banks can make. The properties generally increase in value to the point that the banks can get out with a profit if the people default.

[kapkomet]

Or just have the party faithful start the comments, why wait.

 

The finance close is the fastest and easiest close in the world. Works for all big ticket items. Look at cars. Six year auto loans. I remember when three was the standard and four almost unheard of. Why? To sell lower payments and get people into more expensive vehicles.

 

Historically, mortages are about the safest loan banks can make. The properties generally increase in value to the point that the banks can get out with a profit if the people default.

How nice. And they know it too, which is why they prey on people. It's all about making $$, not protecting the consumer.

[mreye]

How nice. And they know it too, which is why they prey on people. It's all about making $$, not protecting the consumer.

 

 

Let me play Devil's Advocate for a minute.

 

Why should it be about protecting the consumer? Is it the lender's job to educate the borrower? It is about making money and why is that a bad thing? If people are too stupid to go out and borrow $300,000 and not truely educate themselves, screw 'em.

[Steff]

Let me play Devil's Advocate for a minute.

 

Why should it be about protecting the consumer? Is it the lender's job to educate the borrower? It is about making money and why is that a bad thing? If people are too stupid to go out and borrow $300,000 and not truely educate themselves, screw 'em.

 

 

Seriously. It's common friggin sense.

[kapkomet]

Seriously. It's common friggin sense.

To you it is. You're smarter then most.

 

Why are foreclosures going through the roof?

[NorthSideSox72]

I've said this in here before... our current curriculum in high schools (private AND public) around the country has a big hole in the middle of it - HOW TO FUNCTION AS AN ADULT. And I don't mean socially, or in the workplace - I mean day to day things like basic finance, basic practical nutrition, etc.

 

High school students should be required to take a course in basic personal finance. Do that, and you give them all the tools to spend and save defensively.

[Texsox]

Seriously. It's common friggin sense.

 

It's common friggin sense why the lender should protect the consumer, or it is common friggin sense that the consumer should understand their loan before signing?

 

As Jas mentioned there are sound reasons for going with an ARM. And as have also been noted, there are disasters waiting to happen. If the lender is willing to take the risk that they could wind up with a house instead of payments and the borrower is willing to take the risk that their income will not increase to handle the larger payments down the road, who has the responsibility to step in and tell them it is a bad deal?

[Steff]

To you it is. You're smarter then most.

 

Why are foreclosures going through the roof?

 

 

For the exact reason Nuke stated above. Folks don't think BEFORE signing the dotted line. Failure to use their common sense and jump in with both feet exceeding the SOL they can afford.

[NorthSideSox72]

housing prices were way too high before. the market needs a correction

1. Its already correcting. Dropping prices in the absurdly overpriced markets in Cali and Florida and other spots. Prices leveling nationwide. That's about what it needed.

 

2. People going into foreclosures, or more often, just needing to sell and get out of their homes and downsize, will in itself help correct the prices. The immediate effect is broad deviations in sales prices. Then the market re-centers, lower than previously or level to it. So, the people who were short-sighted enough to get into a 2% mortgage 5 yr ARM that loosens to prime +8% or someting absurd, will sell before reaching that point and help the market correction.

[Texsox]

I've said this in here before... our current curriculum in high schools (private AND public) around the country has a big hole in the middle of it - HOW TO FUNCTION AS AN ADULT. And I don't mean socially, or in the workplace - I mean day to day things like basic finance, basic practical nutrition, etc.

 

High school students should be required to take a course in basic personal finance. Do that, and you give them all the tools to spend and save defensively.

 

I've said it before, probably not here, it's the parents job to teach their children to function as adults. We are shifting parenting responsibilities to the schools. Parents should teach their kids about family finances, how to balance a checkbook, how to purchase items, how to finance stuff, how to unclog a drain, lease an apartment, patch a hole in a wall, grocery shop, plan meals, ec.

[Steff]

It's common friggin sense why the lender should protect the consumer, or it is common friggin sense that the consumer should understand their loan before signing?

 

As Jas mentioned there are sound reasons for going with an ARM. And as have also been noted, there are disasters waiting to happen. If the lender is willing to take the risk that they could wind up with a house instead of payments and the borrower is willing to take the risk that their income will not increase to handle the larger payments down the road, who has the responsibility to step in and tell them it is a bad deal?

 

 

 

An individual is responsible for their own actions.

[Texsox]

An individual is responsible for their own actions.

 

Exactly. But too often we go crying to the government for protection from our own stupidity.

[HuskyCaucasian]

ANyone know of any good places to look for forclosures?

[NorthSideSox72]

I've said it before, probably not here, it's the parents job to teach their children to function as adults. We are shifting parenting responsibilities to the schools. Parents should teach their kids about family finances, how to balance a checkbook, how to purchase items, how to finance stuff, how to unclog a drain, lease an apartment, patch a hole in a wall, grocery shop, plan meals, ec.

Except they don't. And actually, I don't agree anyway. I learned that stuff from my parents because I needed to know. Great - I was fortunate. But secondary education is supposed to prepare kids for adult life. To me, finance is just as important as math or English or history. It should be included.

 

I am NOT saying we need to teach home maintenance or meal plans.