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Old 04-21-2008, 03:21 PM
 
3,566 posts, read 3,719,388 times
Reputation: 1364

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I fail to understand the relationship between the bursting of the housing bubble and the rise in foreclosures. I hope someone here can enlighten me. Let's assume I bought a home at sub prime. Presumably that would be an ARM. At some point I had to know that the rate would reset. If I couldn't make the mortgage when the rate reset that's because I wasn't earning enough to pay the mortgage at that point. That would have happened whether the housing market remained strong or crashed. It seems to me that the increased foreclosures would have occurred in any event because so many people had bought at a rate that eventually would be unsustainable. What am I missing here?

 
Old 04-21-2008, 03:41 PM
DB3
 
55 posts, read 307,987 times
Reputation: 41
One reason might be that it's not only about not being able to afford the higher mortgage payment. The intent was probably to refinance before it adjusted but the decline in house values made this impossible because the homes are no longer worth what they're mortgaged for. As a result, no refinancing to lock in a rate equals higher variable interest rates which equals inability to pay the increased mortgage payment and eventually foreclosure.
 
Old 04-21-2008, 03:43 PM
 
Location: Bike to Surf!
3,080 posts, read 11,030,592 times
Reputation: 3022
Okay, assume you have enough money to pay for and qualify for a 6% 30-year mortgage on your new house.

Now, along comes another bank that offers you 3% for 5 years that resets to 10% at the 5-year mark.

You have the option of paying "extra" interest on the safe long-term 6% loan, or saving a bundle by taking a "small" risk on the ARM loan, thinking you'll re-finance at the 5-year mark. The smart choice seems to be to take the ARM.

Well, 5 years later, the housing market has tanked and you owe more on the house than it is worth. The bank says "no way" to re-financing at 6%, and you're stuck with a 10% loan that you maybe can't afford.

That's one possible scenario that makes a little sense.
 
Old 04-21-2008, 04:09 PM
 
Location: America
6,993 posts, read 17,303,862 times
Reputation: 2093
Quote:
Originally Posted by JimMe View Post
I fail to understand the relationship between the bursting of the housing bubble and the rise in foreclosures. I hope someone here can enlighten me. Let's assume I bought a home at sub prime. Presumably that would be an ARM. At some point I had to know that the rate would reset. If I couldn't make the mortgage when the rate reset that's because I wasn't earning enough to pay the mortgage at that point. That would have happened whether the housing market remained strong or crashed. It seems to me that the increased foreclosures would have occurred in any event because so many people had bought at a rate that eventually would be unsustainable. What am I missing here?
To understand it you have to first stop thinking rationally. Think emotionally and without any sense of economic or financial foresight and then the picture will become clearer.
 
Old 04-21-2008, 06:55 PM
 
374 posts, read 1,624,511 times
Reputation: 140
Then there are those that bought NEW CONSTRUCTION at the peak of the housing boom! No money down, seller pays closing costs. Ah ha! 5-6% arm with a 6% cap @ 2% a year. Damn! Now you factor in the cost of Taxes on improved property instead of the low tax bill on unimproved property. Now lots of hurricaines and wha Laa!! An out of control payment that you can't pay! No refinancing people! Prices have come way, way down. Now these stinking teaser rates that were supposed to get you into a home have just caused you to lose it. The intention was to make more money and refinance in the future. BOOOOOM!
 
Old 04-23-2008, 07:51 AM
 
Location: Tampa
3,982 posts, read 10,427,439 times
Reputation: 1200
Shiller: Housing slump may exceed Depression - Real estate - MSNBC.com

seems to me, bailing all these people out wont help the non home owners, who would still be priced out of the market

and it also sets a bad precedent
 
Old 04-23-2008, 11:14 AM
 
Location: America
6,993 posts, read 17,303,862 times
Reputation: 2093
cryastl there is no way in hell they are going to be able to save all these people. If you ever watched the movie cloverfield this is operation hammer in full affect. They are going to have to let some areas go, and save a select few. As my friend says "some people aren't going to make it back from this one"
 
Old 04-28-2008, 04:13 PM
 
Location: Broward County
2,517 posts, read 11,014,387 times
Reputation: 1391
Default Extremely heartwrenching Florida Foreclosure video.

The crisis is reaching an epidemic level. God bless and help all the people in need.


YouTube - The Homeless Families Of Florida 2008
 
Old 04-28-2008, 05:39 PM
 
670 posts, read 1,735,229 times
Reputation: 270
Default The funniest Florida Real Estate story...ever!

Just give it a shot and read a bit

Human Interest_Features: Tower of Solitude

_
 
Old 04-28-2008, 06:06 PM
 
Location: St. Augustine FL.
112 posts, read 522,487 times
Reputation: 38
I was listening to the radio this morning while driving in GA.

They were talking about how the forclsoures rate is going up and some people are buying the forclosers at a cheap price and moving in to just leave their old empty and stop paying the bills for it so the bank will just take it.

Do you think that will happen in Fl too?
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