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Old 04-23-2009, 10:32 AM
 
3,599 posts, read 6,760,340 times
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There's been a lot of talk of doom and gloom how all of these ARMs will reset this summer and maybe next year.

But the fact remains, most of the people who have ARMs resetting this summer will most likely see a DECREASE in their interest rates for at least another year.

My friends interest rate actually decreased from 5.25% down to 4.45% with her rate adjustment this month. So she's pretty much good for another year.

She doesn't know if she will stay in the area or refinance so she's keeping her options open.

Obviously these low treasury rates and Libor rates will not stay this low for a long time but I do not anticipate them raising for at least another year.

So people shouldn't be in a panic mode.

They just need to read the terms of their mortgage notes. It's usually the 1 year Libor rate/treasury rate plus 2-2.5% plus another .25% so the rate adjustments are very good for people with ARMs these days.

Again this is not a long term solution but I haven't seen many major news media running these type of stories.
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Old 04-23-2009, 10:50 AM
 
28,455 posts, read 84,943,296 times
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You sir, are a bright, but disruptive thinker.

The "sky is falling" crowd assumes that EVERYONE with a ARM signed up for some insanely low teaser rate and will inevitably see their rate climb to something totally unaffordable. Well to borrow a phrase from a local car dealer, the lenders might be MAD and they might be BAD, but they're not CRAZY -- lenders DO NOT want any more f'ing foreclosures. There is no reason for them to jack rates to the point where borrowers will default!

The media will not run stories about this because a) MEDIA LOVES carnage, not "don't worry the sun still rises and sets" b) the reporters are TOO STUPID to do the math of this, to their way a thinking ONE wailing idiot deserve more coverage than THOUSANDS of content paying borrowers c) do hear the White House or any other political leadership talking about this? -- the MEDIA LETS THE POLITICIANS DICTATE the story, whether it is right wingers talking up military exploits and reduced regulation or the other side of the aisle "coming to the rescue" the MEDIA simply has little interest in moving away from the news that is "handed to them"...

My personal fear is not that there are untold waves of ARM resets that will then be followed by foreclosures, but instead that too many buyers have been scared out of the market, never to return. This stagnation will result in fewer orders for all the "stuff" that people tend to buy when they move (from appliances to furniture to electronics to drapery to pots and pan, American have lots & lots of STUFF) and THAT will drag down the economy further.
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Old 04-23-2009, 11:13 AM
 
280 posts, read 1,037,632 times
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I agree that having the rates this low means that ARMs resetting this year will not cause catastrophe for most.

I think the fear is that if/when the rates do go back up, these folks will not be able to refinance out of the ARMs (since they are likely underwater in terms of what they owe, if they bought in the last 5 years or so) and that at that time there could be another wave.

What remains to be seen is how long the government will hold the rates down. My guess is no better than anyone else's, but it sounds as though within a couple years they will be raising them again, which will hurt the ARM crowd.

I am not in the bulls or bears crowd--wish I had a crystal ball, but it seems like this situation is so tenuous and could go a number of ways in the next few years, depending on choices made by the government, the reserve, etc.
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Old 04-23-2009, 11:19 AM
 
27,206 posts, read 46,537,403 times
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So basically you advise them to gamble a little longer...
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Old 04-23-2009, 12:12 PM
 
Location: Texas
5,872 posts, read 8,061,136 times
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It's all in the ARM package. If the rate adjustments were every QTR., then most people were crushed. If every six-months then only mildly crushed. Right now those that got ARM's in '02 at the outside are getting to reset to a pretty good rate. However, their rate is still not fixed for the rest of the loan. It's possible it can move month-to-month or as slow as year-to-year depending on the loan product.

ARM's should only be used as how they were meant to be, by investors w/ a short holding time window or those acquire properties and then refinance within the 2-3 year window. Like the Option-ARM products, there is only a select few who can really benefit from those type of products. But the big thing is that ARM's should NEVER be used to qualify for a mortgage that will be held more than 10 years at the outside. That only leads to a host of problems, like we saw in '07 & '08.
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Old 04-23-2009, 01:08 PM
 
3,599 posts, read 6,760,340 times
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Quote:
Originally Posted by chet everett View Post
My personal fear is not that there are untold waves of ARM resets that will then be followed by foreclosures, but instead that too many buyers have been scared out of the market, never to return. This stagnation will result in fewer orders for all the "stuff" that people tend to buy when they move (from appliances to furniture to electronics to drapery to pots and pan, American have lots & lots of STUFF) and THAT will drag down the economy further.

I just hate the news media. Remember the old movie "The Running Man" starring Arnold Schwarzenegger way back in the late 1980's. Well the movie had it so that the world economy had collapsed. The government controlled news media had censored all forms of communication. They fed the public news and manipulated stories.

That's how I feel the news media is today with the real estate crash. Like you said, some more sensational stories like massive ARMs adjustments skyrocketing from 2% all the way up to 10% are more news worth than someone's ARMs actually resetting from 5.25% down to 4.45%.

I feel smarter people (like most of us on these boards) know what's really going on. But the general lay public believes what the news media opts to give them. If they feed the public stories about massive ARMs adjustments, than those with ARMs panic and don't know what to do.

Unfortunately, this leads to widespread fear and lack of confidence.

Sure, I know the economy is bad these days. But it is no where as bad as in the early 1980's when unemployment was between 12-14%.
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Old 04-23-2009, 01:29 PM
 
3,599 posts, read 6,760,340 times
Reputation: 1461
Quote:
Originally Posted by bentlebee View Post
So basically you advise them to gamble a little longer...
It's a calculated gamble for those whose ARMs are soon to reset. You have to do the math.

The vast majority of ARM resets will actually result in decreases in their interest rates.

If someone is planning to move within the next 2 years, it makes no sense to incur refinance charges especially with the way the 1 year treasury/1 year Libor rates are.

Mortgage rates will stay in the 4.5%-5% range for the near foreseeable future.

The point is not to panic. Refinance if/when you are ready, not because everyone is telling you to. Let the ARM reset and you will still have some time to get through this. The 1 year Libor/treasury rates will not raise significantly for at least the next 12 months maybe even a little longer. This is not a long term solution but it helps the majority of homeowners with ARMs resetting.
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Old 04-23-2009, 06:08 PM
 
4 posts, read 10,569 times
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What is the current " United States Treasury adjusted to a constant one year maturity"? On this page Mortgage (ARM) Indexes: Constant Maturity Treasury Index (CMT) in the second box theres a yellow and a blue line. Which one is the one I want to go by?
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Old 04-23-2009, 06:11 PM
 
Location: Great State of Texas
86,052 posts, read 84,131,087 times
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Quote:
Originally Posted by aneftp View Post

Sure, I know the economy is bad these days. But it is no where as bad as in the early 1980's when unemployment was between 12-14%.
The government has changed their unemployment calculations since 1980.
Shadowstats still calculates using the old formula and unemployment is currently at 18-19% (as of 4/3).
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Old 04-23-2009, 07:47 PM
 
3,599 posts, read 6,760,340 times
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Quote:
Originally Posted by HappyTexan View Post
The government has changed their unemployment calculations since 1980.
Shadowstats still calculates using the old formula and unemployment is currently at 18-19% (as of 4/3).
You are correct. Thanks for pointing that out. Forgot that today's unemployment numbers exclude those who have been unemployed for more than 12 months and exclude other factors.

But than again, we don't have 10-15% inflation like they had in the early 1980's.

I was very young in the early 80's so I do not remember those days very much.
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