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Well folks, I'm resurrecting this stinker to merely point out that after 5 long months, my last post here seems more prescient than ever.
To wit,
America is indeed collapsing (it's less funny now, and more scary)
and
the foreclosure crisis can be explained as follows, (in even briefer terms)
Mr. Lying Mortgage Loan Officer: "Hello, would you like a cheap mortgage with a 2% interest rate? No really?"
American Homeowner: "Duh yeah, oh and by the way I am dumb."
Now I have to ask you folks for input, are Americans really THAT dumb and ignorant that they sign-up for ARM loans and don't even so much as GLANCE at the loan papers they sign at the closing?
Or is it that people desperately needed a lower payment and just signed-up for the ARM loans no matter what the fine print said would happen a couple years later when the note rate started adjusting based on the index + margin minus any applicable adjustment caps?
Personally, I think Americans REALLY ARE that ignorant and dumb?
P.S. I'm not a jerk or a troll, just stating the miserable FACTS....
I don't believe for one minute that anyone who signed up for an ARM didn't know that the loan was going to reset at a higher rate. Nor do I believe this was information kept from them by a greedy loan officer. They knew but assumed that they would miraculously be making enough money to cover it by the time it did reset.
Now I have to ask you folks for input, are Americans really THAT dumb and ignorant that they sign-up for ARM loans and don't even so much as GLANCE at the loan papers they sign at the closing?
I have two friends, a mother & a son, who did precisely that. They signed the papers without reading them & now... Well they're reaping what they have sown.
I think everyone is judging people who signed up for these loans a little to harshly.
Here is my story. 2001 prices were rising pretty quickly at the time, wife wanted to get into a home before we were priced out of the market. I was pretty much against it because I didn't think we could afford a home. Real estate agent shows up some real crap in our price range, in Long Beach, Ca where we wanted to buy, finally shows us a nice 1 bd, 1b, condo . Still seemed a little pricey for us, considering we were a one wage earner family, bringing in under 40k a year.
Loan officer is selling us on an 80% 20% blended option ARM, 0 down, with payments $150.00 a month cheaper than our current rent. Wife gets excited, I wanna keep her happy, because after all if she's happy I'm happy. I also figure there is no downside, it cost $1200.00 in closing cost as seller paid half of those. My only risk was trashing my already marginal credit, losing $1200.00 of closing cost, and having to move in 3 years, as thats when the loan reset.
Jump ahead to August 2004. We are looking to refinance, the only loans we are being offered, seemed like banks were really trying to rip us off, we couldn't get into a 30year fixed without jacking our payment up $400.00, just didn't seem right to us( i don't remember all the specifics other than my credit was still marginal) they were still pushing an option ARM. We refused to go through this all again in another 3 years, and pay all the extra bank charges. So our plan was to move out to the Ca high desert.
We sold our condo for almost 3x what we paid, paid cash for a nice 2br 2b home out in the desert, paid off all our credit cards, 2 car loans, put 20k in improvements in the new home, and put a healthy sum of money in the bank.
So my point is I don't think everyone who bought these option arms are totally stupid, they just got sold very hard on these products, and jumped on the wagon to late. Personally I blame the banks for all their losses, they pushed the product, they required no down, it almost seemed stupid not to take it, there was no risk to the home buyer.
I think everyone is judging people who signed up for these loans a little to harshly.
Here is my story. 2001 prices were rising pretty quickly at the time, wife wanted to get into a home before we were priced out of the market. I was pretty much against it because I didn't think we could afford a home. Real estate agent shows up some real crap in our price range, in Long Beach, Ca where we wanted to buy, finally shows us a nice 1 bd, 1b, condo . Still seemed a little pricey for us, considering we were a one wage earner family, bringing in under 40k a year.
Loan officer is selling us on an 80% 20% blended option ARM, 0 down, with payments $150.00 a month cheaper than our current rent. Wife gets excited, I wanna keep her happy, because after all if she's happy I'm happy. I also figure there is no downside, it cost $1200.00 in closing cost as seller paid half of those. My only risk was trashing my already marginal credit, losing $1200.00 of closing cost, and having to move in 3 years, as thats when the loan reset.
Jump ahead to August 2004. We are looking to refinance, the only loans we are being offered, seemed like banks were really trying to rip us off, we couldn't get into a 30year fixed without jacking our payment up $400.00, just didn't seem right to us( i don't remember all the specifics other than my credit was still marginal) they were still pushing an option ARM. We refused to go through this all again in another 3 years, and pay all the extra bank charges. So our plan was to move out to the Ca high desert.
We sold our condo for almost 3x what we paid, paid cash for a nice 2br 2b home out in the desert, paid off all our credit cards, 2 car loans, put 20k in improvements in the new home, and put a healthy sum of money in the bank.
So my point is I don't think everyone who bought these option arms are totally stupid, they just got sold very hard on these products, and jumped on the wagon to late. Personally I blame the banks for all their losses, they pushed the product, they required no down, it almost seemed stupid not to take it, there was no risk to the home buyer.
You made an investment and did very well. Congradulations, that was an excellent move and good thing you were able to relocate to cheaper housing. Many are unable to do that.
If your home had sold for less than what you paid, you would be stuck with additional debt, the credit card debt, and car payments. While you made out others did not and the chips should fall as they may.
Others will come in and invest in that same property and try their hand.
I realize I got lucky, however I think you missed my point, alot of people got into the same product i did, it doesnt mean they were idiots, or evil. It seems to be fashionable to bash everyone in forclosure, because they got into an ARM. I can understand thier thinking, and feel for them, and if anyone is to blame, it's my contention it's the banks, and loan officers, whom tried to steer everyone into this product.
I realize I got lucky, however I think you missed my point, alot of people got into the same product i did, it doesnt mean they were idiots, or evil. It seems to be fashionable to bash everyone in forclosure, because they got into an ARM. I can understand thier thinking, and feel for them, and if anyone is to blame, it's my contention it's the banks, and loan officers, whom tried to steer everyone into this product.
That is true. A friend of mine bought a condo in 2003 or so, and her Agent and the Agents mortgage broker tried to steer her into both an adjustible loan and into a property that was about 200k more than she could afford on a fixed rate loan. She ran her own #'s on a mortgage calculator & declined. She did buy something within her budget, but she has a finance background, so she knew much better. However, if she was planning to flip the prop. it would have been a better choice to do the ARM.
All the People who bought in weren't evil or stupid, they were just mis-informed and uneducated on the subjet. That's why I've always felt that math & finance courses should be mandatory in high school. Since they went in with nothing, they walk with nothing but a mark on their credit...back to being renters.
Thanks so much for the input, folks. And a great story from DesertRich about real estate.
It all points to the idea that ARM mortgages are a risky but useful financial tool that should be used by people who have at least a fairly sophisticated knowledge and/or experience in real estate.
People who are basically clueless about real estate lending and finance should NOT be the target market for ARM mortgages, although unfortunately that is the long-standing mortgage industry practice....
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