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Seriously he's on the money... Finally.. I've been telling my husband and my crazy MIL that this whole mortgage crisis isn't based on Subprime alone. I processed loans from 1998 until 2005. People don't realize that those neg am loans he's talking about also go by the name of "pick a pay", "Option ARM". World Savings who is now Wachovia has done those loans for at least a decade. Countrywide and Wachovia still advertise them. There was a Wachovia ad for it during a commercial break on the Suze Orman show. Insane...
They chose the lower payment which barely covers the interest and the rest of the principal and interest payment gets tacked on to the end of there mortgage. Those loans were a pretty big deal in CA, that's how people most people were able to afford there house, based on a "pick a pay" or neg am suicide note. Craaaazy!
Option ARMs have been around much much longer than 1992, in fact, for decades before that. In the 1980's, when conventional rates were high (double digits), option ARMs came in at least 2% under those rates.
As far as the World loans go, World always appraised low - for example, if you wanted an 80% loan, you really got 75% b/c they lowballed the appraisal.
Those loans aren't for everyone but if you do the equity builder (bi weekly payments), you can pay off your loan in 22 years. World also has a variation on the Option ARM now.
To this day I still remember an ex-patriate of Los Angeles telling me that bad cash-flow forced him to leave. That was in 1991. At the time it meant nothing to me, but I understand what it means now. My general thesis is the US and maybe the good rest of the fungible world has leveraged itself based upon debt with suppressed interest rates. The debts can be forgiven or re-financed or paid off in inflated currencies. I tend to believe these things are cyclic though. They can be painful on the downturns.
Yep, it all hinges on knowing when to get out. Or to get out quicker than you think you should, to make sure you don't lose it all in the downturns. Wall Street and real estate have a lot in common: you'll never go broke taking a profit. And those late to the party usually find the punch bowl empty.
Location: Jonquil City (aka Smyrna) Georgia- by Atlanta
16,259 posts, read 24,752,651 times
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Quote:
Originally Posted by Exedous
Even my father, who never went to college, predicted this housing crash. And how could people who have a college degree and been in the market for so long could not of forseen this? It's ridiculous.
Anybody could have seen that wreck coming. People who work buy the houses. You cannot have any item that increases in price at 6 times what the buyers pay increases and expect the market to remain viable. Houses that were going up at 25% a year were being bought by people whos wages were going up at 3 or 4% a year.
Anybody could have seen that wreck coming. People who work buy the houses. You cannot have any item that increases in price at 6 times what the buyers pay increases and expect the market to remain viable. Houses that were going up at 25% a year were being bought by people whos wages were going up at 3 or 4% a year.
finally, someone "gets it". I don't think people are prepared for just how much their homes are going to fall by. Unless of course, the govt pursues a policy of wage inflation.
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