Not just ARMs, but interest-only loans, which should be illegal. And now they're pushing to eliminate the tax deduction on home equity loan interest.

One of the more precious things I hear on this blog is that the new low value US dollar is good for American business, the thinking being it makes our goods cheaper in realtionship to other economies, blah, blah, blah, blah,....

Imagine how fun it was to read that the idiot son's protectionist trade policies have launched a trade war. Yes, a trade war.

All war, all the time, on all fronts and every aspect of existence, 24/7.

The Trade War.

...the European Union and Canada have joined hands to slap an extra 15% tariff on a range of US goods in retaliation to the Bush administration's use of anti-dumping duties

So the dollar drops 15% making our goods cheaper and...Hmmmm!

Before I forget: 44 soldiers were injured at Abu Ghraib. 4 of those had minor injuries, so they don't count in the official counting of counted injuries.

As mortgage rates have risen in the past few weeks, homeowners have been choosing adjustable-rate loans in greater numbers. In March 2005, 36.6 percent of applicants were getting adjustable-rate mortgages, according to the Mortgage Bankers Association.

Having had an ARM, I can tell you that some of these people are going to be in for a very big surprise. 36.6% is a huge number of people. What I don't understand is when you can lock in interest rates around 6% or lower, why in the world would you go for an ARM?

What I don't understand is when you can lock in interest rates around 6% or lower, why in the world would you go for an ARM?

Because you can get more house if you can knock another percentage point off with a ARM. People are living, or trying to live, beyond their means. They'll take a chance that they'll be doing better in 5 or 7 years time when their rate starts changing. They figure they'll be able to pay more by then.

ABU GHRAIB PRISON TARGETED AGAIN.

Monday 04 April 2005, 15:52 Makka Time, 12:52 GMT US soldiers were among the casualties in Monday's attack

The Abu Ghraib prison, west of Baghdad, has been hit by a blast for the second time in less than 48 hours causing casualties among US forces.

ljazeera has learned that a bomber detonated his explosive-laden car at the main gate of the prison on Monday.

Sources from Abu Ghraib told Aljazeera that five Iraqis were injured and that the explosion also caused casualties among US soldiers.

Monday's attack was the second in less than 48 hours when fighters attacked the prison late on Saturday, injuring 44 US soldiers and 12 inmates.

For some, when the chimporer says "all is good" they belive it. For others, they knowingly take bad advice that tells them they can have a slightly larger McMansion and slightly lower ARM at the frontend of their mortgage.

Many of these people are right on the edge. As many here did, I too saw what interest could be like in the late 70's early 80's. Wowee Zowee!

"They'll take a chance that they'll be doing better in 5 or 7 years time when their rate starts changing."

In this economy, I wouldn't feel confident enough to go for an ARM.

I bought a house in the 80's. Never having owned a home, I took the advice of my lender and went for an ARM. Within three years my mortgage payments escalated over $200.00 a month.

In this economy, I wouldn't feel confident enough to go for an ARM.

Good advice, Judith. As you mention though, tough not to take the advice of a lender who appears to have your best interests in mind.

I would rent for a while. I predict a housing market collapse in the next 18 months or so due to rising interest rates. I've seen this happen in local economies. Around 83' the oil economy in Oklahoma went bust and I saw homes worth 120K at the time that wouldn't sell at 40K. It can happen. Hope it doesn't, but I think it will.

First of all, rising energy prices are not inflationary.

Regarding mortgages, banks have come up with more ways to get lower-qualified people into homes. Sure, those in interest-only loans might be in for a shock in 2-3 years when the loan converts to a fixed-rate loan.

And with regards to real estate, the fish are biting. Much like stock IPOs in the late 90's. Everybody is bidding up the price of homes. Sure, it'll end like the stock bubble ended. All speculative manias end badly.

I wouldn't want to be highly leveraged in real estate at this point. I know some folks who have bought 2nd and 3rd homes, with the hopes of flipping them for a 20-30% profit in the summer. Meanwhile, they're either letting them sit empty and making monthly mortgage payments or renting them out for less than their mortgage payment. (In today's environment, rent prices are falling).

I think in the end, banks will be foreclosing on a lot of these homes.

The banks will give ARMs and interest-only mortgages to people who would otherwise be unable to qualify for a home, just as many credit card companies will be happy to give 26% APY credit cards to people who would otherwise not be able to get credit cards.

Now that bankruptcies will be harder to come by, these people can be 'bought' into debt servitude for a major portion of their working lives. New homeowners simply don't get enough straight information from lenders about the risks of these types of mortgages. It's usurious, it preys on vulnerable people, and it should be illegal.

Many ARMs provide for fixed rates for the first 5 or 7-year terms. If someone is planning on moving (either due to retirement or trading up to a larger house) in that time frame, what is wrong with choosing an ARM? You save money due to the lower interest rate. By the way, sometimes rates float down.
Note to Judith- I am sorry to hear that a "$200 per month increase in mortgage payments" is significant enough to make you uncomfortable.

stats,

You think 36% of homebuyers in California are planning on turning over the house in the next 5 to 7 years?

In the 1980's (twenty years ago stats) a mortgage payment increase of $200 a month within months of purchasing a home could be problematic. But you were just being an asshole weren't you.

Yes, if you're planning on moving in a few years, then maybe an adjustable rate mortgage makes sense. But what if housing prices fall for 5 years straight like they did in the 1990s, and you're upside down in your mortgage? (In otherwords, you owe more than it's worth.)

Would you still want to sell your house if you have to come up with tens of thousands in cash to cover the difference? If not, then you'd be staying in the house and forced to refinance at whatever the rate is.

If someone is planning on moving (either due to retirement or trading up to a larger house) in that time frame, what is wrong with choosing an ARM?

In a broken market you might take 3-7 years just to sell it.

I know some folks who have bought 2nd and 3rd homes, with the hopes of flipping them for a 20-30% profit in the summer.

There are optimists and then there are fools, muck.

First of all, rising energy prices are not inflationary.

I think in the end, banks will be foreclosing on a lot of these homes.

(Note to self: When muck pitches reasonable twice in a row, be on guard for one low and outside.)

Note to Judith- I am sorry to hear that a "$200 per month increase in mortgage payments" is significant enough to make you uncomfortable.

Posted by Stats

I didn't say it made me uncomfortable. I am just saying that within three years, my mortgage had gone up that much on a 3-year ARM. I took the advice of my lender. Their reasoning was based on that fact that interest rates usually go down befor an election. Obviously, they were wrong.

Note to Judith- I am sorry to hear that a "$200 per month increase in mortgage payments" is significant enough to make you uncomfortable.

Posted by Stats

I didn't say it made me uncomfortable. I am just saying that within three years, my mortgage had gone up that much on a 3-year ARM. I took the advice of my lender. Their reasoning was based on that fact that interest rates usually go down befor an election. Obviously, they were wrong.

Thanks raisin for the info. on tax deductions.
Tax relief hah, in my case the write off on my fixed rate loan(I bought long term) is worth a whole lot more than a measly $300 rebate. Subsidizing Bush and friends through the tax code is going to become even more expensive as the size of the debt continues to grow and the 'tax cuts' remain sacrasaint. Hope you love subsidizing the elete through the tax code red state America. Just like with private accounts,when Bush sells it, there's CHAINS attached, not strings.

BTW, I know of people who during the 70's-80's had ARM's long term and actually experenced negitive amortization.

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