Adjustable Rate Mortgage Impact Could Be Worse Than Subprime Crisis

miamiherald.com:

WASHINGTON -- Call it son of subprime. Experts warn that a new wave of mortgage foreclosures may be coming soon and could rival the default rates for subprime mortgages and slow efforts to find bottom in a prolonged national housing slump.

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Read the whole story: miamiherald.com

Comments

[ko2ko2]

I can't wait to buy a house for the real value, let all those who put 0 down with no doc learn to rent. Some in my family are being foreclosed on and I'm actually happy for them, because a house that is not affordable is a nightmare more than an american dream... Now they rent and live within their means...

[nomorefed]

Your house is worth $125,000 but you paid $250,000 don"t worry with "Mark-To-Market" Neutered you can say whatever you want to about your home value and no one can refute you!
Now when you go in for a loan, simply declare the house is worth $300,000 and along with your clean "ON-THE-BOOKS Balance Sheet" with no visible other debts means you get money from the FED at 1% interest or maybe less!
Why can"t this world be true for ALL AMERICANS like it is for Wall Street?
We do not own Congress and they DO using ill-gotten FUNDS!
Are the Wall Street Banks really healthy? With "OFF-THE-BOOKS" accounting and "MARK-TO-MARKET" Neutered who knows what the truth is!

good articles: href=".http://kl.am/tsc> recommended website

[confidance government]

Actually the next big crisis will be in the commercial real estate market. At approximately 180 square feet vacated for every lay off, this crisis will hit the economy like a tsunami.

[southbay]

As a real estate agent who has been in the business for many years, I have seldom recommended ARMs, but some of my clients have gone that direction anyway. The ones who have ... are typically exceptionally cautious people, in fields of employment that are subject to extreme fluctuation. To my knowledge, these people have regularly made extra large payments, rather than the minimum. Even during the current crisis, I am not aware of a single Buyer among my clients, who has made less than the minimum payment amount, AND, of those who are upside down ... all are dedicated to staying in their homes. These Buyers are exceptionally dedicated to home ownership, and are exceptionally resistant to the idea of losing their home. In my experience, this is a non-problem, being exploited for effect.

[munki]

Before damage occurs... have ARM 5 to be extended to ARM7 or 10...

Give extra 3-5 years at same rate or allow to MODIFY!!!

[ko2ko2]

Why? Can my parents modify their 15 year old mortgage too? Why are these new buyers so special? Can I modify my lease, since I am stuck in a lease because these houses are not being foreclosed on and prices are being artificially propped up? People need to take their medicine, and move on...

[Lorianne]

http://market-ticker.org/archives/1137-The-Dumbest-Thing-Ive-Seen-Yet.html

[nomorefed]

1st 100 days - There are 2.9 million more people unemployed in May than there were unemployed in January. The unemployment rate went from 7.6% to 9.4%.
Since May 2008, we have lost 5.5 million jobs. The biggest losers were:
Manufacturing 1.5 million lost
Finance & Prof Serv 1.5 million lost
Construction 1.1 million lost
Retail & Leisure 1.3 million lost

good articles href=".http://www.bit.ly/12NCJR>recommended reading

[Sharon908]

People are still so focused on the subprime debaucle which PEAKED in 2007. We are now in the ALT A, PRIME, JUMBO and OPTION ARM with negative amortization loans. All of these loans were done in 2005, 2006, 2007 and early 2008. They have already started re-setting depending on origination date of either 3 year, 5 year or 7 year terms. The latter loans brought WACHOVIA to their knees and literally imploded Washington Mutual, Bear Stearns, Freddie Mac, Fannie Mae, Indy Mac and Lehman Brothers. Government imposed moratorium has kept many of these loans off the current bank balance sheets for a limited time. "BING" the word moratorium. These above mentioned loans have much larger loan amounts than the subprime, and the capital that banks have already raised will be dwarfed by what comes due on their balance sheets during reset times. The videos done in 2008 by a 20 year mortgage veteran in California will explain the timing and amounts of these loans in comparison to the earlier subprime. To really understand what is happening to the housing market, you need to learn about what these loans really represent and their subsequent "creative packaging". The following sites will help for those interested.
http://www.youtube.com/user/markmti
http://mrmortgage.ml-implode.com

[DLBSR]

Thank you Sharon. I have been saying the same thing for months. The banks are now falsely reporting profits when they know these additional tsunamis may well be their Waterloo. The Stress Tests in my view were a sham, designed to reflect a preconceived end result in an effort to attract the small investors back into the market and provide the banks capitalization for these additional sub-prime fiascoes. See my USS America post below.

[Lorianne]

The Next 10 Shoes To Drop: OptionARM Explosion __ video at this site explains it well.

http://www.businessinsider.com/shoesdrop/option-arm

[InsideRater]

With all that is happening we still believe that the market will be better.... our site http://www.InsideRater.com is growing rapidly.

[karen1p]

This is exactly what is happening to me. I put over 20% down. Planned on this house being a "short-term" investment. Now, with housing prices sinking and my mortgage rising....­well....yo­u can imagine. The two numbers have met several months ago and now I am totally under water.

Sinking...­...Obama..­....there has to be some sort of solution here. The people that have followed the rules are being caught in this mess.

[sc300nc]

Every investment has risks. Yours did not work out so you want the gov't to take care of your mistake? Ever heard of responsibility?

[Sharon908]

Before making such an irresponsible comment, you need to LEARN about what you think you're talking about.

[hearmeout]

Geez, try to at least have a heart. This person put over 20% down and tried to do the right thing. Like you, I believe in capitalism and personal responsibility and that this whole bailout business has run amok and must be stopped. But I'd stop short of slamming someone like karen above just for hoping for a little relief. Have some compassion for chrissake.

[Lorianne]

Nearly everybody is losing value on their investments, even people who have no mortgage ... their property values have fallen too.

What do you propose should be done for nearly EVERYBODY?

[M1]

Well, if the Banks would give the loan modifications this would not be on the horizon anymore. We have all been sold a bill of goods. The Banks have no regulation on the TARP money and are not modifying the private loans (Obama affordability plans don't help non Freddie or Fannie Loans). Meanwhile, our government stands by while American after American goes into foreclosure. Sickening.

[Sharon908]

Some banks are doing modifications. The problem is that the housing market has gone down 20% or more, so you have an equity imbalance. If the loan is an OPTION ARM with negative amortization you also have resets coming doubling your payment as well as more negative equity as you'll need to make up the difference between the interest only payment, and now having a fully amortizing payment. That is additional equity imbalance. Who do you think will make up the difference between what you owe and what comes due? The amount can be staggering, so no, modifications will not work unless banks would offer equity reductions...yeah right...more foreclosures on the horizon.

[Truelee]

Then after the ARM's default, there is the commercial real estate default, the credit cards, the auto loans, and so on. By the time we are done correcting, our economy will have shrunk greatly and our national debt will be above GDP and we'll have skyrocketing deficits. It's amazing how the GOP has kept the country focused on fear and created and economy based on war so we can all think we're doing well.

Don't spend if you don't have to. Cash is king in this downturn.

[RJPasadena]

Next? Adjustable mortgages ARE already part of the mortgage meltdown. These "Subprime" loans were the Adjustable, no interest, interest only type loans. I am going to stop reading the HuffPost. You people are stupid!

[karen1p]

No, you are the idiot. The subprime loans were the zero down loans. The mortgages that were 80/20. Those were the original problem. Now, the wave of people that put down 20%-25%, and were given an ARM. BTW, ARM's have been with mortgages for a very very long time. It has only been in the last 5 years that you could buy a house with absolutely no money. You do a 80/20 loan, inflate the offering price and have the seller pay your closing costs.

The only time in history that a person with less-than-stellar credit could buy a house with NO MONEY!!!!!

I had to scrimp, save, buy Top Ramen to eat for a year so that I could put down $10,000 to buy my first home. If you don't have any money, time, sweat invested in the buying process, you won't take heroic measures to save your house when the times get tough. Sub-prime it was too easy to just walk away. And they have. Now, it is making us that played by the rules caught in this horrible sticky web of crap where there is no way out. Losing all the down payment, everything.

[karen1p]

The subprime loans were the zero down loans. The mortgages that were 80/20. Those were the original problem. Now, the wave of people that put down 20%-25%, and were given an ARM. BTW, ARM's have been with mortgages for a very very long time. It has only been in the last 5 years that you could buy a house with absolutely no money. You do a 80/20 loan, inflate the offering price and have the seller pay your closing costs.

The only time in history that a person with less-than-stellar credit could buy a house with NO MONEY!!!!!

I had to scrimp, save, buy Top Ramen to eat for a year so that I could put down $10,000 to buy my first home. If you don't have any money, time, sweat invested in the buying process, you won't take heroic measures to save your house when the times get tough. Sub-prime it was too easy to just walk away. And they have. Now, it is making us that played by the rules caught in this horrible sticky web of crap where there is no way out. Losing all the down payment, everything.

[hearmeout]

Yeah Pasadena, maybe you're right: Huff Post would be better off w/o you as well perhaps. Option-ARM resets, which are the subject of this piece, have barely begun to reset and will not peak until late 2010. Do your homework before you pop off.

[DLBSR]

You really don't have a clue do you? Some people are misinformed, some uninformed, which one would be most descriptive of you?

[DLBSR]

We are in real deep trouble. I wrote about this last December in an effort to make Main Street aware of what was on the horizon. Here is a small excerpt of waht I wrote and posted here on HP.

Sub-prime, the first-born tsunami has two meanacing siblings, Alt-A and Option ARM, each born from three seismic disturbances with epicenters on Wall Street in New York and along Pennsylvania Avenue In Washington. The three tsunamis share the universally recognized surname of Mortgage. Alt-A and Option ARM are much larger than Sub-prime, and if permitted to collide with the already weakened America unabated, catastrophic and incalculable damage will be inflicted to her. As with the tsunami Sub-prime, the captain and crew have fundamentally ignored the ominous nativity and swift nascent of Alt-A and Option ARM while appallingly striving to dispense culpability for America's present challenges to surrogate bureaucracies and institutions, thus affording both Sub-prime siblings an unhindered course to America's broadsides. These are the perils threatening to propel the great ship America into the abyss.

[Sharon908]

You have a valid point...Sub-prime is finally on the backburner, now prepare for OPTION ARMeggedon which will include ALT A , PRIME and JUMBO loans. These loans also had borrowers that put 20% down or more, and had much higher credit scores and loan amounts. Foreclosures have only just begun.

[DLBSR]

Some reports have the total value of these loans at $1.8 trillion. Up to 70% are predicted to default, leaving the banks (and ultimately the taxpayers) with another $1.2 trillion or so in additional toxic assets. We are still circling the drain despite all of the "confidence building" talk emanating from Washington.

[watchTVgetSTUPID]

I mean, c'mon, $165 billion in Treasuries for sale in the next week? Get ready for mortgage rates to rise.

$31 billion in 3-month bills
$27 billion in 7-year notes
$40 billion in 2-year notes
$37 billion in 5-year notes
$30 billion in 6-month bills

Annualized this is $8.58 trillion dollars!